Wednesday, April 13, 2011

Italian and French firm sizes

In the light of the recent realization that Lactalis was detaining 15% of Parmalat's shares, and then quickly rose this number to 29%(just below the threshold mandating takeover bid), there has been a lot of discussion on the relations between French and Italian firms. The main issue seems to be that France is not reciprocating the openness of Italy to French takeovers. One can look at the two lists made by l'Express of cross-border takeovers/stakes


Acquisitions ou prise de participation d'entreprises françaises en Italie
Lactalis : Parmalat (agroalimentaire) en cours et Galbani (agroalimentaire)
EDF : Edison (énergie) en cours
LVMH : Bulgari (luxe), Fendi (luxe), Emilio Pucci (luxe), Acqua di Parma (luxe), StefanoBi (luxe) Rossimoda (luxe), Tod's (luxe)
PPR : Gucci (luxe), Sergio Rossi (luxe), bottega veneta (luxe)
Auchan : SMA (dsitribution)
Carrefour : DiperDi (distribution)
BNP Paribas : BNL (finance)
Crédit agricole : Intesa Sanpaolo (finance), Cariparma (finance)
AXA : Monte dei Paschi di Siena (finance)
Bolloré : Mediobanca (finance), Generali (assurances), Premafin (finance), Pininfarina (automobile)
Groupama : Mediobanca (finance)
GDF-Suez : Acea (services publics)
Air France-KLM : Alitalia
--
Acquisitions ou prises de participation d'entreprises italiennes en France
Italcementi : Ciments français (construction)
Maurizio Borletti : Groupe Printemps (distribution)
Generali : La France (assurances), Athena (GPA, proxima) (finance), Prudence vie, Continent Assurances, Zurich (finance et assurances)
ENI : Altergaz (énergie)
Campari : Wild Turkey (agroalimentaire)
Delfin : Foncières des régions (immobilier) 

Likewise, french invesments in italian firms reached 36bn euros in the last 5 years while the reverse flow was only 3bn, even if Italy was the 4th source of FDI in 2010, a record year for France when FDI rose 22% year on year. The main example of the asymmetry, and one that seems to be mentioned in Italy, is the Villepin's government not-so-subtle protection of Suez in 2006

In 2006, the French government engineered a merger between the water utility Suez and Gaz de France to prevent Suez from being acquired by Enel, the Italian energy giant.
That same year, BNP Paribas of France bought Italy’s Banca Nazionale del Lavoro. In 2009, Air France-KLM took a minority stake in the Italian flag carrier Alitalia. And this month, LVMH Moët Hennessy Louis Vuitton, the French luxury goods conglomerate, announced that it would buy the Italian jeweler Bulgari.

The main thing I have heard to explain the recent events is the difference in sizes between French and Italian firms. In a recent podcast on France Culture, I understood that France has a deficit in its numbers of Small and Medium-Sized Entreprises(SME) while Italy had a deficit in large firms(it is mentioned in the Economist of this week). Nicolas Baverez mentioned that France has 4350 SME between 250 and 5000 employees, including 3000 subsidiaries of large firms, while except for Fiat & Generali, Italy does not have a lot of big firms. One of the paper I mentioned below states that in 1998, the average firm size in Italy was half the European average and "average size is consistently smaller even within fairly narrowly defined sectors"., so that the difference is not due to sectoral specialization

For  now, I don't have a lot of interesting things to say. The question is just: Why? The first paper I stumbled upon tries to understand the small average size of Italian firms by investigating the impact of employment protection legislation. However, the results are negative
Our results show that EPL does influence firm size distribution, but that its effects are quantitatively modest: average firm size would increase by less than 1% when removing the threshold effect. 
Another paper might provide some ideas:

We contrast firms that continue to be managed within the family by the heirs to the founders with firms in which the management is passed on to outsiders.(...)We find that the maintenance of management within the family has a negative impact on the firm’s performance


One paper and a 2008 article by the WSJ explains that small Italian firms are actually benefiting from globalization and are doing great. From the paper:
small Italian firms have been very successful in the age of globalization, better able to take advantage of their small size by means of flexible strategies to innovate, invest and increase their export.
and from the WSJ
 Once thought too small to survive in a global market, these companies have carved out niches around the world. According to the latest available figures, Italy's share of the global export market rose by 6.1% in the first half of 2007, compared with the same period a year earlier.
In any case, I'll post some stuff if I find some explanations. For now, you can have a look at some data description with some emphasis on Italy in a 1999 paper

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