French dealmakers pin hopes on improving macro conditions

French M&A retreated to pre-pandemic levels last year, but decreasing inflation could spur transformative dealmaking in 2024

In line with the global trend, France’s M&A momentum slowed in 2023 following the sky-high figures recorded post-pandemic. A total of 1,561 deals valued at US$74.9 billion were announced last year, down 16 percent and 18 percent, respectively, compared to 2022.

This activity marks a return to pre-pandemic levels of activity—when 1,633 deals targeting French assets worth a combined US$74.9 billion were announced in 2019—with slowing economic growth and a challenging inflationary environment inhibiting most large-scale M&A in 2023.

Care home restructure takes the top spot

France’s largest deal of 2023 was the acquisition, by public sector financial institution Caisse des Depots et Consignation (CDC), of a majority stake in Orpea as part of an ongoing restructuring. The care home group is seeking to improve its financial position and revive its reputation following allegations raised in 2022 of mistreatment of elderly residents.

The agreement, worth more than €5 billion and announced in early 2023, consisted of a €1.5 billion cash investment from a consortium led by CDC, along with a €3.8 billion debt-to-equity swap. The deal, which should reduce Orpea’s debt by an estimated 60 percent, was hailed as a turning point for both the group and France’s care home sector.

Once the courts approved the restructuring, Orpea announced a €1.2 billion capital increase in December 2023, and a subsequent €390 million rights issue in January. The proceeds will finance the group’s “Refoundation Plan” as it attempts to regain the confidence of stakeholders.

Shipping giant buys into fast-growing logistics industry

The transport and logistics sector generated France’s second-biggest deal of the year, according to Mergermarket, with French shipping group CMA CGM’s €5 billion takeover offer for the logistics business of transport conglomerate Bolloré Group. With combined revenues of approximately US$24 billion, the tie-up will cement CMA CGM as one of the top five players in the global logistics industry.

Marseille-based CMA CGM generated record sales during the pandemic, with profits of almost US$25 billion in 2022, and was keen to put this money to work in M&A. Expanding its logistics arm aims to reduce dependency on its maritime shipping business, as the Red Sea crisis has provided another example of the industry’s potential for volatility.

Two months after its bid for Bolloré Logistics, CMA CGM struck a pair of deals in Spain. In June 2023 it acquired shares in terminals in Valencia and Bilbao managed by Cosco Shipping Ports Spain, bolstering the group’s strategic presence in the Mediterranean. CMA CGM’s appetite for M&A has extended into 2024, with the group announcing on January 30 that it would acquire British logistics company Wincanton for £567 million.

Software sector proves a bright spot for dealmaking

France’s technology, media and telecom sector generated the highest volume and aggregate deal value in 2023, but both figures are a steep drop from recent annual highs. A total of 339 TMT deals worth US$14.1 billion were announced last year, representing year-on-year declines of 27.3 percent in volume and 45.7 percent in value.

Deal activity in the sector was driven largely by domestic players, with local bidders involved in 266, or 78 percent, of the country’s TMT deals last year, but international acquirers made their presence felt in large bids for French software and data assets. Indeed, the country’s two largest technology deals of 2023 featured bidders from North America.

The largest of these saw US customer engagement business Concentrix acquire Paris-based outsourcing and consultancy firm Webhelp in a US$4.8 billion deal. The combination will diversify and strengthen Concentrix’s client list as it looks to expand beyond its core North American market.

France’s second-largest technology deal saw Brookfield Infrastructure Partners move into Europe’s burgeoning data services space. The Canadian investor acquired a majority stake in Data4 from French asset manager AXA IM in a deal valuing the Paris-based data center company at around €3.5 billion. The transaction marked Brookfield’s first foray into Europe’s data center market.

At the time of the purchase, Data4 was operating approximately 30 data centers in France, Italy, Spain, Poland and Luxembourg. Since the deal, Data4 announced a €2.2 billion debt raise to finance its expansion plans across Europe.

Supermarket shake-ups fuel consumer M&A

After TMT, France’s consumer sector was the next busiest in M&A value terms last year, generating US$13.8 billion of deals.

This figure was bolstered by the ongoing restructuring of the debt-ridden Casino retail group. The sixth-biggest French food retailer has suffered from a lack of investment, causing it to lose market share to competitors.

In July 2023, private investor Daniel Křetínský and Casino’s creditors agreed to inject €1.2 billion into the cash-strapped French grocer, while reducing the company’s debt by €6.1 billion. In Q4, Křetínský compelled Casino to divest some of its largest, loss-making stores to help pay down its debt burden. Soon after, retailers Intermarché and Auchan began negotiations to acquire Casino’s 313 hyper- and supermarkets, valuing them at around €1.4 billion.

Meanwhile, rival supermarket operator Carrefour has also been on the hunt for deals, announcing in July the purchase of Cora and Match supermarket assets in France, from Belgian retail group Louis Delhaize. The €1 billion deal—Carrefour’s biggest acquisition in France in more than 20 years—will see the group, currently the second-largest retail chain in the country, take ownership of 55 hypermarkets and 77 supermarkets as it looks to consolidate its position in the domestic market. Carrefour followed up this acquisition with a smaller deal in September, acquiring 47 supermarkets and convenience stores in Spain from El Corte Inglés for €60 million.

A cautious outlook

The gradual decline in inflation across the euro area will cheer dealmakers considering transactions in the French market. According to the latest Eurosystem projections, headline inflation is predicted to halve from 5.4 percent in 2023 to 2.7 percent in 2024 and fall to 2.1 percent in 2025.

Improving economic conditions have led economic forecasters to predict that the European Central Bank will cut interest rates in Q2 2024, though monetary policymakers have kept their cards close to their chest. As the bank’s executive board member Isabel Schnabel recently put it, “We still have some way to go, and we will see how difficult the famous last mile will be.”

While the outlook for France’s M&A market remains difficult to predict, the prospect of lower borrowing costs is reason for near-term optimism. While restructurings were high on the agenda in 2023, improving financing conditions could produce opportunities for transformative M&A over the coming year.

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