We define the French market as the transactions involving at least one French company, either on the buy-side or the sell-side or on both sides. This definition includes hence cross-border transactions as well as domestic ones.
The French M&A Cross-Border Market was c. €150bn in 2006:
France does not show a high level of investments from foreign investors (USD40bn only in 2006 vs 191bn in the UK and 203bn in the US). The expected change in the French economic and regulatory environment, as well as the improvement of the image of the country abroad under the leadership of Sarkozy should grow this figure in the 5 years to come.
Major targets still exist in France. The list of potential targets (source : Les Echos) shows that the French corporate market is far from being fully consolidated.
Mid-size deals should boom.
c. 700,000 SME's will have to change ownership in the 10 years to come. This will be supported by a positive tax environment securing disposal of assets instead of closures. Companies employing 50 to 500 people should take this opportunity to enter into accelerated growth strategies, reaching the size levels required by key groups such as Airbus (cf this INSEE analysis, French).
Cross-border deals should continue to grow in all sectors.
The last decade has seen major deals in sectors which were traditionnally closed to cross-border transactions (Defense, energy, civil engineering...). French authorities and French groups have learnt how to secure external growth abroad on sensitive markets, building on what the Thales group has named "the Multi-Domestic Approach", i.e. ensuring that a strong degree of organisational autonomy could be defined to reflect national constraints (eg. Alcatel-Lucent case). A list of "strategic sectors" for France has been established under the leadership of former PM Dominique de Villepin, with unclear enforcement evidence yet.
Some sectors have a very high degree of domestic concentration (retail, energy, defense and aerospace, automotive...). In such sectors, external growth strategies are targetting emerging economies (eg in the banking sector, in the cement and construction sector,...).- Other sectors still have a very low degree of concentration and are currently building national or regional champions (e.g.mutual pensions, private hospitals, real estate..) ; they will enter progressively into cross-border deals.
Author: Gilles Ourvoie (gilles.ourvoie@pmifactory.com). Gilles has worked for c.15 years on strategy and PMI projects for major international groups. Within the Strategy & Transformation consulting activity, he has developped the French PMI Center of Excellence at Gemini Consulting and Capgemini (1997-2004). Between 2004 and 2007, he has launched the Transaction Integration Services practice of Ernst & Young France (within the TAS Corporate Finance), and in the CWEA Area (Italy, Spain, Belgium). As such, he was part of the TIS Global Leadership Team. Since 2007, Gilles is Partner at PMI Factory.