IF DINNER PARTIES had been permitted in locked-down France, it isn’t exhausting to guess what would set le tout Paris aflutter. For months bankers, politicians and different pre-covid canapé-scoffers have taken sides in a company battle royale pitting two century-old corporations in opposition to one another. Veolia, a water- and waste-management utility, has been struggling to gobble up Suez, a rival which is resisting fiercely. The proposed deal is mired in authorized disputes, boardroom recriminations and ministerial intrigue. All grist to the mill for many who see French enterprise because the product of its politicians’ dirigiste tendency to form the personal sector within the mould of the general public one. However have a look at the broader French enterprise panorama and the stereotype is old-fashioned. Away from the clutches of politicians, many French corporations have grow to be world-beaters. Is that this due to the eye of elected officers—or despite it?
The ugly spat between Veolia and Suez exhibits politics nonetheless issues in Parisian enterprise circles. Given the 2 corporations supply the identical outsourced environmental providers to prospects dotted throughout the globe, a tie-up has lengthy been mooted. Veolia having already seized almost a 3rd of its goal’s shares, all sides has lined up members of l’institution to make its case. Their temporary will not be a lot to persuade shareholders of the deserves of a deal, as is likely to be the case in Britain or America. Somewhat, politicians whose assent is taken into account vital are an essential viewers. Suez and Veolia are every mentioned to have a former speechwriter to President Emmanuel Macron lobbying for them (not the identical one). Given {that a} slew of authorized challenges and regulatory clearances is required, the result won’t be recognized for months. Few suppose it can hinge on the transaction’s business deserves.
Such intrigue used to thrill the French enterprise elite. Now it feels outdated hat. Take a look at the highest of the CAC 40 index of France’s main firms right this moment, and a brand new era of corporations has emerged. Twenty years in the past the company league desk was dominated by corporations in sectors wherein relations with authorities matter, reminiscent of telecoms, utilities or banking. The bosses of France Télécom or BNP Paribas, a financial institution, had been inevitably former ministerial advisers. Most of the time they’d graduated from the École Nationale d’Administration (ENA), a ending college for public officers.
Quick ahead to right this moment and the CAC 40 is led by firms with much less use for political connections. The index’s brightest stars right this moment are luxurious giants reminiscent of LVMH (of Louis Vuitton fame), Kering (Gucci) and Hermès; L’Oréal, a beauty-products agency; Sanofi, a drugmaker; and a number of commercial giants. Promoting purses or skincare merchandise to Chinese language yuppies is a world contest wherein French corporations excel, due to competent administration. Lesser-known however equally astute firms reminiscent of Schneider Electrical, a specialist in energy-management package, have outperformed American rivals reminiscent of 3M and Common Electrical, and European ones like Siemens and ABB. Buyers in Air Liquide, a chemical substances agency, have loved juicier returns than these of Germany’s BASF or America’s DuPont. Publicis, an promoting group, is price almost thrice as a lot as in 2000, whereas rivals like WPP in Britain and Omnicom in America have misplaced market worth. EssilorLuxottica, a French-Italian agency, is the world’s largest purveyor of spectacles.
Much more telling, some huge corporations started to prosper solely as soon as unshackled from the federal government yoke. Whole, an oil-and-gas main, was price a fraction of BP or Royal Dutch Shell. Because it has gained distance from the corridors of energy since privatisation in 1992, it has caught up with its European rivals’ valuations. Safran, an aerospace agency, has seen its market worth go up 14-fold in 20 years because the state has bought down its stake. Airbus has outpaced its American jetmaking nemesis, Boeing, as political meddling (by the numerous European governments that based it) has ebbed.
And right this moment political allies carry much less heft than they as soon as did. In line with Morgan Stanley, a financial institution, over 70% of huge French corporations’ revenues these days come from abroad, the place French politicians maintain little sway. Most regulation vital to French corporations was executed at nationwide degree, the place regulators had been drawn from the identical ENA lecture halls as company bosses. Now loads is carried out by European or world watchdogs.
That isn’t to say that huge corporations and politicians keep away from one another. France’s overseas minister lately waded into LVMH’s takeover of Tiffany, an American jeweller, in ways in which had been eyebrow-raisingly helpful for the French luxurious champion. However direct patronage is changing into a burden. The French authorities stay a shareholder in Renault and in 2019 clumsily dealt with a proposed merger with Fiat Chrysler Cars, an Italian-American rival (whose huge shareholder, Exor, owns a stake in The Economist’s father or mother firm). Peugeot, a nimble competitor with no direct state shareholding, is now within the midst of the merger Renault fluffed.
French whines
Company France has loads of shortcomings. It has no tech giants to match Google or Amazon. Many giant firms with few state ties, reminiscent of Accor, a resort chain, and Carrefour, a retailer, are decidedly abnormal. The CAC 40 was lagging behind its European and American equivalents even earlier than covid-19 hit the French economic system notably exhausting. Its smaller corporations pale compared to Germany’s Mittelstand. And French politicians, although not the dirigiste master-planners of yore, nonetheless pine for nationwide (or European) champions to tackle Chinese language rivals. They frown on hostile takeovers—the mere prospect of which serves to sharpen managers’ minds—which is one motive the Veolia-Suez deal might fail.
That could be a disgrace. Simply ask Danone’s shareholders. In 2005 an unsolicited method by PepsiCo for Danone was foiled by the French authorities on the grounds yogurt-making was a strategic business. The American agency went on its approach and has since delivered fizzy earnings for its shareholders. These at Danone, in the meantime, have needed to abdomen far blander returns.■
This text appeared within the Enterprise part of the print version beneath the headline “Dirigiste? Moi?”
