France can now (legally) veto all acquisitions by foreign companies

May 16, 2014
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The potential acquisition of Alstom by General Electric has made more than the usual headlines in France & around the world, notably due to the French government’s lobbying for German competitor Siemens to acquire the company’s ailing Energy division, currently valued at upwards of $17 Billion. For those without memory loss, this process may feel quite similar to that of the Yahoo-Dailymotion scandal, in which the French government, who owns a 22% stake in Dailymotions’ parent company Orange, used their board position to insist that Yahoo acquire no more than 49% of the company (the terms of the deal were 66% for €200 Million).

This deal, unfortunately, has much more grounds for interruption, and France doesn’t want to see its national champions sold off to foreign (read: American) companies. For this reason, a decree (for Americans, think “executive order”) was signed by Arnaud Montebourg – yes , that Arnaud Montebourg, the one who wants to kill Uber, the one who stopped the Dailymotion acquisition, and the one who is in charge of the Digital Economy – allowing the French Government to override acquisitions of national importance, adding the Energy, Water/Gas & Electronic Communications sectors into this list.

Not only does this include GE’s acquisition of Alstom, but it also retroactively could have implications on Numericable’s acquisition of SFR; however, with SFR’s other suitor Bouygues currently shopping around for acquirers, I doubt the French Government can handle the thought of interrupting the acquisition and hurting SFR, along with Vivendi (their current owner).

Lastly, if you look closely, you’ll notice that “Electronic Communications” includes just about every startup you know – Internet of Things/Connected Hardware, all those Billion-dollar messaging apps, and even Eventbrite, or Deezer. What startup does not include electronic communications these days, given the increasing role of M2M & API communications?

In an interview with LeMonde[fr], Montebourg refers to the government’s extended ability to block acquisitions or fix terms as a “necessary rearmement for the Government” – apparently the government didn’t have all the ammo it needed before.

So – international investors, you know what you gotta do: stay out of France. It hurts to say it, but the country that coined Laissez-Faire economics just killed it.