France’s acquirer-friendly insolvency laws make it an attractive destination for Indian corporates in search of acquisitions. François Montrelay, Ulrike Heidegger and Stéphane Béraud explain
As the world’s sixth largest economy, France is an important destination for Indian business and investment. The country boasts a large number of successful small-scale companies – many of them in the technology sector – with annual revenues of around US$20 million. These enterprises are often in search of strategic partners to help them fuel growth and expand into overseas markets.
Automotive equipment, aviation, engineering services, information technology, industrial chemicals, telecommunications, water and environmental management, medical equipment and agricultural machinery are some of the key sectors of French industry that have traditionally proved attractive to Indian buyers. And as the financial crisis wreaks its toll on companies in all sectors of the economy, the opportunities for cash-rich Indian investors to acquire French assets are increasingly attractive.
France boasts some of the most acquirer-friendly insolvency laws in Europe. These laws, combined with the increasing number of French companies that are running into financial difficulties despite having healthy business fundamentals, present attractive opportunities to Indian corporations in search of overseas acquisitions.
For the potential acquirer, the intent should be strategic. The deal should make business sense, fit into an overall strategy and be a source of additional value.
French insolvency laws allow for the transfer of some or all of an insolvent company’s assets to a third party under a process known as a transfer plan (plan de cession). Although it is a relatively simple transaction, potential buyers must take legal procedures and timeframes into account.
In contrast to many other European countries, French legislation and case law tends to give highest priority to ensuring the continuation of business activities, and a lower priority to creditors. This has created an acquirer-friendly business environment in which creditors have less of a say in the decisions made by courts than in other countries.
Francois Montrelay is the managing partner of P2P Consultants, a strategy and corporate finance consulting firm in Paris and Bangalore. Ulrike Heidegger is a lawyer at the bars of Marseilles, France, and Stuttgart, Germany. Stephane Béraud is a partner at Oxigen, a French consulting firm specializing in assistance to distressed companies.