Until a few days ago, Parmalat was one of the few – around twenty, according to data from R and S Mediobanca – «Italian multinationals». Now that the takeover bid launched by the French for Lactalis has finally gone through, what are we up against?
This, plus the recriminations on what could have been and was not, seems to us to be the crucial question at a time when the new geography of world economic development, where the growing weight is that of the emerging countries, is also reflected in the new wave of mergers and acquisitions (M&A) globally.
Seen in this light, the Franco-Italian operation led to the birth of an authentic "European Champion"; that is, a new large company capable of exploiting the potential of the single European market and, therefore, the result of a cross-border M&A operation that passes the scrutiny of the market.
These characteristics make the "Champions" of our day very different from the "National Champions" of past and now distant decades.
At that time, the single market was yet to come, industrial policy was an instrument firmly in the hands of the nation-state, which very often exercised it through the "selection of winners" by creating, precisely, the "National Champions ». Here, the objection of the 'Chicago Boys' (and many others) is known and widely shared: but how could (can) the State know better than the markets the ways to allocate resources in an optimal way?
Today, after Jacques Delors' White Paper (1985), the single market (read: full freedom of movement of production factors) is not only a concrete reality - it certainly is for the manufacturing industry - but it has been crowned, for many EU countries, since the birth of the euro. And industrial policy, which has fortunately returned to talk after the decade of the financial hangover, is a policy area where powers are distributed among several levels of government (supranational, national and regional) and where the «selection of winners » is no longer the main instrument.
In truth, the (old) industrial policy has not only caused disasters, as a certain vulgate suggests: just think of the four European countries that gave life to the EADS consortium, the controlling holding company of Airbus; and also, on a smaller scale, the French-Italian joint venture STMicroelectronics. Be that as it may, if we call these "European Champions" of "Type I", to say of their birth by the will of the 'Prince', who also knows how to be enlightened, we will call the Champions born in the manner of Lactalis-Parmalat "Type II" : that is to say, cross border M&A, as we were saying, implemented on the single European market and in accordance with the principles of free competition.
The story does not end here, because already in the recent past, in conjunction with the other big wave of M&A (let's say 2005-2008, before the freeze following the big crash), another characteristic was observable with the naked eye: the absolute prevalence of operations of a "horizontal" nature. Outside the jargon of the experts, there is a tendency to put pears with pears and apples with apples – contrary to what happened in the age of conglomerates. In doing so, the company's core business is strengthened by expanding its production range and strengthening the differentiation of products/services in order to conquer new markets.
This stylized fact, central to the operation of the food industry now under our examination, can also be found in the other recent and sensational acquisition of a very precious brand (it is appropriate to say it) of 'Made in Italy' (Bulgari) from part of a luxury giant like LVMH. On closer inspection, the umpteenth acquisition made by Diageo (this time the prey is the Turkish Mey Içki) is framed along the same perspective – just to remain in recent times and to touch upon different industrial and service sectors; AT&T's mega-acquisition of T-Mobile USA; the operation, transatlantic by definition, between Fiat and Chrysler; the same merger, already communicated to the Brussels antitrust authority, between NYSE Euronext and Deutsche Börse. And the list is much longer.
In addition to a classic horizontal merger (from which economies of scale and scope derive), in certain consumer goods sectors the strengthening of the core business can then take place by following another path. Which is yes - again to stay with the jargon in use - that of "vertical" operations, but which must be targeted and not dispersive such as, for example, those aimed at entering distribution directly. Think, in this regard, of the successful strategies implemented by two leading Italian fashion companies such as Luxottica (Oakley) and Tod's (Saks).
The birth and strengthening of what we have defined as "Type II" "European Champions" will increasingly be the litmus test of the ability of a country-system to promote economic development in the global age we are living in. In this sense, the location of the headquarters of our «European Champion» – in short, the beating heart of the company where the strategic functions are concentrated, which need quality human capital – is not a neutral decision, irrelevant for the fate of the new player.
The Champions League can and must be played from Parma.
