Hard Lessons From A Failed Acquisition

The French government blocksCanadian grocery and convenience store chain Alimentation Couche-Tard's takeover ofCarrefour.

The Canadian would-be acquisitor dropped its bid, worth about €16.2 billion ($19.6 billion), when the French government, citing concerns about food security, opposed the deal. The ill-fated takeover of Carrefour by Canadian grocery and convenience store chain Alimentation Couche-Tard bore a trace of déjà vu: recalling PepsiCo’s 2005 attempt to take over Danone. That deal too ended when politicians hotly demanded that the government keep Danone in French hands.

Before advancing too far with plans involving French acquisitions, foreign corporate suitors need to consider history, says Gavin Graham, a UK-based financial analyst and commentator. “Fifteen years later, the French are still using national security as an excuse to protect what they regard as national champions,” he says, “even if it’s obviously ridiculous to protect food brands.” Yet, he adds, French companies buy businesses in other countries in industries that could be regarded as more important to national security, like electricity generation and transport.

The Carrefour deal collapsed when news leaked before the companies formally consulted the government, as is customary after signing a letter of intent. Compounding the difficulty, elections are scheduled in 15 months and the government of President Emmanuel Macron did not want to be seen as allowing a foreign takeover of a major national champion, with resulting job losses. Killing the deal also appeased farmers who feared competition from Canadian imports despite the protection that EU import taxes afford them. Whether Carrefour and Alimentation Couche-Tard will try again after the election remains to be seen.

The lesson for executives contemplating a takeover, especially in France: Obtain government clearance early in the process. Depending on the sector, another solution may be to seek a welcome mat elsewhere, Graham counsels. The UK and Scandinavia are open to foreign takeovers, he says, pointing to the recent takeover of British insurer RSA by Canada’s Intact Financial and Denmark’s Tryg.