M&A

Martin Bouygues will sleep well tonight. Good for him

A Bouygues store in France. Image by Laurent Grassin via Flickr. License: CC BY 2.0

A Bouygues store in France. Image by Laurent Grassin via Flickr. License: CC BY 2.0

The commercial logic for selling the Bouygues telecoms business to the French state was strong, but other more human motivations scuppered the deal. There's nothing wrong with that. 

Did Martin Bouygues’ ego scupper the long-running attempt to merge his telecoms company with Orange in France? Possibly. Is that crazy? Not really.

First, the background. Several months ago French the billionaire and mogul Martin Bouygues - whose family business was founded in 1952 as a construction firm by his father Francis - floated the idea that Orange, which is partly state-owned in France, should buy the telecoms business that he founded in 1994.

On paper, the deal looked appealing. Bouygues would get €5bn, and become Orange’s second-biggest shareholder, after the state. Given that Bouygues Telecom has been struggling for the past few years, that appeared sweet.

However, there were problems. The merger would create competition issues, and Bouygues would have had to sell some of his stake to smaller players to ease them. Ironing out these deals was tricky and negotiations were involved.

The state was also reportedly nervous that, as a long-term shareholder, Bouygues’ shares in the new company would have double the weight of other shareholders’, which would give him an amount of power they were unhappy with.  

Culture clash

Perhaps just as importantly, there seemed to be a clash of culture and personalities between Bouygues and the government’s Economy Minister Emmanuel Macron, who was looking after the negotiations for the state. (At least until prime minister Manuel Valls intervened and personally called Bouygues to try to save the deal last week, an intervention which failed.)

Bouygues reportedly stormed out of a meeting with Macron in late March. Maybe some generational tensions played a part -- how did the 63-year-old Bouygues feel about being dictated to by 38-year-old Macron? Was it relevant that the current government is left-wing, while Bouygues is godfather to one of the children of former right-wing president Nicolas Sarkozy?

For people who prefer their deals to be done on the strength of balance-sheets and cold, hard ebitda figures, this will surely seem like a ridiculous reason for this takeover to be derailed. Bouygues didn’t like the cut of the other chap’s jib, and possibly didn’t trust him. And so it was off.

Behavioural business

That is not as daft as it might sound. In recent years there has been a broad acceptance of the insights of behavioural economics, which says that we make decisions not based on logic, but our unconscious biases. This re-introduction of the human into economics is making it a more realistic science.

We should also recognise the human element in business in general and accept that it is not an irrational embarrassment, but the heart of the matter. The Bouygues deal shows just how powerful it can be. The commercial logic doing the deal was compelling. But for family-owned companies deals are not always about money. Martin Bouygues decided that he would feel more comfortable walking away.

There are more important things in life than money - like dignity, happiness, and being able to sleep at night. Unlike CEOs or directors with fiduciary duties to their shareholders, family business owners are able to pursue those ends. Some people might call that irrational. It is also a human reality.

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