Double Standards in French Mergers – aka – It’s Good to be Semi-Public in the Hexagon

Francois Hollande was elected thanks to its populist-yet-not-overly-extremist approach themed ‘let’s blame the riches for everything we can’. It’s therefore no surprise that his government has led many (most???) successful entrepreneurs to reside in neighboring countries or that his own prime minister has publicly made completely out of line comments directly insulting (in French) some of its most successful citizens.

It was, nonetheless, a surprise for me in 2013 when his government opposed to Yahoo acquiring Daily Motion under the pretext that the video streaming sites is one of the few successful French tech companies and it would be unacceptable to see it go to a foreign company. Bad decisions based on flawed thought process have been a constant in this government, so no surprise here. However, has no one in this pathetic government paused and wondered why there aren’t as many flourishing startups in France as there should, given the rather good educational standards and the number of French entrepreneurs opening up shops in Silicon Valley and other parts of the world?

Basically, not only can local entrepreneurs and investors be hesitant to invest in a startup because of the complexity of French labor laws and high tax rates, but now, they also have worry about becoming too successful as it might prevent them from exiting their investment!

Anyways, why bringing up this old news today and where are the double standards?

Well, I stumbled upon this Reuters post which brought back these sad memories. Apparently, it is OK for Hollande & Co. to block a merger for completely chauvinistic reasons – albeit 100% unjustifiable as there was no risks of any monopolistic position, no defense risks for the country, etc. – but, on the other hand, there does not seem to be a problem with State-controlled telco buying out one of its other 3 competitors, bumping up its market shares to over 50%.

No, you see, we learn in this post there seems not be a problem here because “The teams get along well”.

What’s even more ironic is that Bouygues Telecom has been for sale for a while now and, when its competitors Free and SFR were rumored to looking at it a couple of years back, the head of the antitrust regulation body was quoted as saying that the watchdog opposes mergers in the telecoms sector., as reported by TeleGeography. Have times changed so much in 2-3 years that now 4 players in an industry is regarded as fragmented?

… Or is Hollande doing the French tax payer a huge favor in letting State-controlled Orange spend a mere 10Bn Euros in Bouygues Telecom? After all, hasn’t Orange S.A. – fka France Telecom – already proven multiple times its ability to generate optimal wealth for the French taxpayers? The company is that of the Minitel (precursor to the Internet that never quite took off because they decided to monetize the hell out of it). It is also the group that earned the title of second most indebted company worldwide in terms of short-term liabilities following its seemingly unfocused acquisition spree (aka Let’s buy everything that moves), resulting in a 15Bn Euros capital infusion by the then-majority shareholder, the French Republic…

The conclusion of this post, I guess, is that if you’ve started a company in France and it’s on its way to become a leader, you’re out of luck if you’re considering a liquidity event… that is unless the government is one of your leading shareholders, in which case, apparently, you can use that to your advantage and build yourself a virtual a monopoly.

Let’s end on a positive note, though. Apparently, Hollande himself understood that after 5 years of beating up the French economy to a slow death, he should not run for a second mandate…

Image Credits: Reuters.

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