While 2015 was a record year for M&A in France, last year was an altogether different story with the number of transactions taking place falling by 9% year-on-year. This was certainly not unique to France, rather it was reflective of a global trend that saw worldwide M&A activity report a 22% dip on the year before.
There were of course some notable transactions that took place during this period. According to a report published by Reuters, M&A transactions involving French companies totalled €156 billion in 2016, with the single largest (announced) transaction being the repurchase for €18 billion of a 25% stake held by Crédit Agricole in 39 regional banks, which led to the creation of SACAM Mutualisation.
However, the start of 2017 triggered a resurgence in activity with the number of transactions reported by the end of Q2 already up 44% on the total number for 2016 – a staggering rebound in anyone’s book. Much of this is due to overseas acquisitions. Indeed, outbound M&A activity by French firms in the first six months of 2017 was eight times higher than over the same period in 2016 – up from $5 billion USD to $40.8 billion USD. This puts M&A activity at its highest in France for six years, and with Emmanuel Macron as president this is likely to increase even further.
The former Rothschild employee clearly set out his business-friendly vision for France during the presidential election campaign. He knows that France is at the epicenter of the Eurozone and is keen to promote European cross-border M&A activity. Macron is also acutely aware that uncertainty over Brexit and a squabbling UK government present France with the unique opportunity to stake its claim as the new financial hub for Europe.
In September, Macron succeeded in pushing through the labour market reform bill which, it is hoped, could pave the way to make Paris a more attractive location for financial services firms within the single market. The president hailed what he called “a deep, unprecedented reform of the labour market, crucial to our economy and our society”, adding that the reforms will have a profound effect not just on financial services employment but “in particular for the young and the lower qualified.”
The relaxation of labour laws are intended to create a more flexible labour market and make France, and therefore Paris, a more attractive place to do business – irrespective of whether Brexit is followed through to completion or not.
Of course, Paris is already home to a wealth of financial players. But the increased volume in M&A activity and surging interest in the French capital as a potential contender for London’s crown is stimulating greater demand here for experienced investment bankers. London will inevitably be a great source of skilled M&A professionals keen to relocate to Paris not just in order to continue working in their chosen field, but keen also to embrace the Parisian lifestyle.
There is no doubt that London’s role as the leading financial district of Europe will continue for the immediate future, but the balance of power is shifting towards other major hubs. It was forty years ago when Margaret Thatcher cemented London’s position as the European financial heartland following a series of labour reforms and deregulation that boosted the UK’s competitiveness. M. Macron is seeking to do the same for Paris. The question is, will he succeed? Only time will tell.
David Greaves
Partner, DJG Consulting
(Executive Search for M&A, Private Equity & Bilingual Support)