Follow-up... Is Sarkozy France's best hope against predatory hedge funds? The French establishment bets on Sarko's pro-US, pro-Israel leanings to alleviate corporate France's inexorable demotion to "Wall Street subsidiary" status....
Frenzy for takeover deals takes hold in Europe
By Mark Landler Published: April 26, 2007
FRANKFURT Most years, the United States handily beats Europe for bragging rights in deal making, based on the total value of mergers and acquisitions.
But this year, Europe is pulling ahead. The current takeover battle in banking, the biggest in the industry's history, is just the latest sign of the growing deal frenzy on the Continent.
That frenzy is prompting changes in corporate behavior. European companies are scrambling to put themselves in play, or fend off unwanted approaches, much like American companies did in the 1980s.
Europe's deal mania reflects a number of trends: more active shareholders, particularly hedge funds; an influx of private equity money; low interest rates; and a wealth of European companies with valuable assets that are ripe for the picking, in some cases because they have been poorly managed.
"Shareholder activism and hedge funds are acting as a trigger to doing more restructuring kinds of deals," said Alexander Dibelius, head of Goldman Sachs in Germany. "In combination with private equity and cheap money, this adds to the perceived increase in deal making."
It is more than just perception. So far this year, the value of mergers and acquisitions announced in Europe is $656.4 billion, compared with $601.4 billion in the United States, according to Thomson Financial (Europe also led in 1990, 1991 and 2002).
Europe's new economic buoyancy is also providing a tailwind to deal makers here.
Growth rates in Europe are approaching those in the United States, and Europe may outperform the United States this year if the American economy slows.
Germany, in particular, is booming, with soaring investor confidence and heavy capital spending. Companies are reporting record profits, as they reap the benefits of years of painful overhauls.
Having retrenched thoroughly, European companies are emerging with leaner cost structures and greater ambitions. The German energy giant, Eon, for example, made a €42 billion, or $57 billion, bid for its Spanish counterpart, Endesa - a deal that eventually collapsed because of resistance from the Spanish.
That deal underscores a hurdle to deals in Europe, particularly cross-border ones: Protectionism is alive and well. Political leaders in France, Italy and Spain speak unabashedly about keeping national assets from foreign buyers. Nicolas Sarkozy, the conservative front-runner for the French presidency, promises to maintain France's tradition of defending "national champions" in crucial industries.
In Germany, the former head of the Social Democratic Party, Franz Müntefering, scored points during the last election by referring to foreign hedge funds and private equity investors as heuschrecken, or locusts, intent on plundering German assets and mistreating workers.
While European executives are generally more open to cross-border deals than politicians, some play the nationalist card when it suits them, to ward off unwanted suitors.
Porsche, the German sports car maker, has amassed a stake in Volkswagen of over 30 percent, justifying its action by saying that it is trying to fend off a potential takeover by foreign private-equity investors.
Fears of hostile approaches by financial investors have helped fuel the efforts of DaimlerChrysler to unload its money-losing Chrysler division, according to executives at the company.
They may have even played a role in the abrupt ouster Wednesday of the chief executive of Siemens, the engineering giant, which has been hit by a corruption scandal.
People with ties to Siemens said that members of its board were worried that if Siemens did not get past the scandal, the company would be vulnerable to a takeover bid by a private equity firm.
There is ample evidence that hedge funds and other foreign investors are shaking Europe out of it old habits.
ABN AMRO's negotiations with Barclays were started in part by pressure from the Children's Investment Fund, a London-based hedge fund, which owns less than 3 percent of ABN AMRO.
Three years ago, bankers here said, it would have been inconceivable for a hedge fund to force one of Europe's largest banks to, in effect, put itself in play.
But in 2005, the Children's Investment Fund waged a fax and e-mail campaign against the management of Deutsche Börse, the German stock exchange, which was seeking to take over the London Stock Exchange.
Not only did Deutsche Börse end up having to abandon the bid, but the company's chief executive and its chairman were forced to resign.
The European Central Bank has done its part to keep business humming. While the bank began tightening credit at the end of 2005, its key rate of 4 percent is still below that of the U.S. Federal Reserve. Most economists expect that the bank will move cautiously in raising rates further.
iht.com
Corporate Board Member Europe Winter 2005
Feature Story
A Former U.S. Marine Hits Europe’s Corporate Boardrooms
by Julie Connelly
Shareholder activist Guy Wyser-Pratte is shaking up businesses around the Continent—and says he’s got more targets in his sights.
[...]
What is different about the environment in Europe, compared with what you’re used to in the U.S.?
In the U.S. it’s not so much the establishment, the way it is when you go into France and Germany. In France you have a huge political problem to overcome, because first of all the French don’t like to be told by anybody, particularly an outsider, what to do.
And even though I have dual French and American citizenship, they speak of me as “Here comes the American Marine.”
You have a clique in France, an old-boy network, the old families aligned with the bureaucracy. This clique has a sort of vested interest in preventing the entrepreneurial class from climbing in society. I would like to show the entrepreneurs the way to force change through the financial markets. I have a political agenda as well, which is that they should really be embellishing the private sector.
In Germany it’s a little different. It’s what they call Deutschland AG—Germany Inc. And that’s the political class, which you could say is the Socialist Party [the Social Democratic Party], the party in power now. They control everything. If somebody wants to get something done in Germany and the wrong party is in power, forget it.
[...]
boardmembereurope.com
One French icon goes to the Americans
By John Tagliabue The New York Times
SATURDAY, JULY 23, 2005
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