French companies' attempts to mimic their US counterparts are doomed and they would be better off exploiting their own business culture
The French media conglomerate Vivendi Universal had many different agendas. It wanted to integrate the phone and media industries, create a European challenger to US media giants such as AOL Time Warner and provide a platform upon which its former chief executive Jean-Marie Messier could shine.
It also wanted to hold at bay the tide of American cultural imperialism, at least that was how much of the French establishment saw it. 'With companies like this, France has been able to defend its cultural identity,'' said Martine Aubry, France's former social affairs minister before the company hit bottom. That is why the appointment of Barry Diller as co-CEO of Vivendi's US media assets, including the Universal film studio, is a symbolic surrender.
Diller is an old-school Hollywood mogul, the kind of guy who would cast Jennifer Lopez as Madame Bovary, after he got the script monkeys to play around with Flaubert's storyline. The point of Vivendi was to stop men such as Diller ruling the world. It certainly wasn't to provide the rungs for his climb back up the Hollywood ladder.
This has been a dismal few months for corporate France. At Gemplus International, one of the few genuine technological stars of the French economy, the founder has also been outwitted and out-played by a bunch of wily Americans. Gemplus was started by Frenchman Marc Lassus and, over 14 years, was turned into one of the world's largest manufacturers of smartcards.
That is a big emerging industry and Gemplus had done well to carve out a leading slice of it.
Lassus has recently been ousted as Gemplus chairman by David Bonderman, who controls the US investment firm Texas Pacific Group. Texas Pacific has only 25% of Gemplus's shares yet its executives appear to have out-thought Lassus. His replacement is an American, Alex Mandl, a former president of AT&T. Make that Corporate America two, Corporate France zero.
Nor is the game a new one. A decade ago, Credit Lyonnais went on a huge acquisition spree designed to catapult a Paris-based player into the big league of global banking.
It wound up losing billions as it poured money into film studios, real estate and golf courses. That prompted the biggest state bail- out in French history, although at least the French stayed in control of the bank.
The lesson that should be learned from the losses French executives suffer when they take on American executives is this: when the French try to copy the Americans, the Americans win. Not surprising, really. The Americans are better at being American than the French. They've had more practice.
Gemplus and Vivendi had one thing in common: they were both in love with the American way of business. At Vivendi, Messier mimicked the lifestyle and aspirations of the American tycoon class.
It was as if he had learned everything he knew from the pages of Fortune and Vanity Fair. He got the big Manhattan apartment, wrote books, did dozens of deals and built a company that was a reflection of himself.
When he came up against a real American tycoon, it was no contest. Messier wanted to be Barry Diller. The real Diller turned out to be a lot better at it than the wannabe.
It was debt that caused Messier's downfall. It was Diller who put himself in a position to be a beneficiary of that downfall. In retrospect, the deal negotiated between Diller and Vivendi looks a lot smarter for the American than the Frenchman. Vivendi couldn't sell any of the assets it bought from Diller without paying for his tax liabilities, and without giving half the proceeds back to Diller. Now Messier is gone. His successor, Jean-Rene Fourtou, is picking up the pieces and Diller is in the driver's seat in the US. Not very nice, perhaps, but very smart.
Likewise, Gemplus. Lassus has said he fell in love with the American way of doing business while working for Motorola in the 1960s. Yet despite his infatuation with US corporate life, Texas Pacific appears to have gradually levered him out of power. Again, not nice, but smart.
France has lots of successful companies. They prosper by being French. Airbus runs rings around Boeing but it does so by using government money rather than the capital markets, exploiting political connections and planning by the decade. Shareholders come low on its list of priorities.
LVMH Moet Hennessy Louis Vuitton dominates the luxury goods industry but emphasises its national identity. It doesn't bury it.
Messier and Lassus tried to play by different rules than the ones they grew up with. The US has the biggest, most competitive capital markets in the world. Only the fiercest beasts survive in that jungle. Men such as Messier and Lassus who come late to the American game, and play as outsiders, face long odds going up against the home team.
Bloomberg newsroom, London
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