The surging number of cross-border mergers and acquisitions within Europe’s $6.5 trillion economy is revolutionizing the way business is conducted in this vibrant 11-country marketplace. That was the bottom line of Wharton’s 1999 "Preparing for Success in Europe 2000" conference held at London’s imposing Landmark Hotel on June 24th and 25th attended by more than 150 top executives from over 17 countries worldwide. The conference focused on telecommunications and finance, two of the fastest-growing major sectors of today’s information-rich European economy.
Business today is blessed and cursed with the availability of instant information worldwide, said Didier Delepine, president of Equant n.v., the global communications giant. As a result, he added, companies must reinvent themselves every few years and in the future they’ll have even less time than they do today.
Hilmar Kopper, chairman of the supervisory board of the Deutsche Bank AG, stressed that the pan-European markets demanded by today’s European customers, and the resulting surge in cross-border mergers and acquisitions, are moving the industry ever closer to universal banking. This makes the management of cultural differences essential to business survival, he said, as the business can no longer be controlled by the head office in any one country.
There’s never been a merger or acquisition that’s made life easier, said Kopper, but you can help things go smoothly and fast by doing two things. First is to make all the tough decisions up front at the start of negotiations so no one will be taken by surprise. Second is to make it clear to everyone, including the top management of the company being acquired, that you are going to run the show. Four days after Kopper made those remarks, the chairman of Bankers Trust, which the Deutsche Bank had acquired a few weeks earlier for $10 billion, resigned.
Companies today can’t move fast enough to globalize their operations, said Kathleen Walters, sector president of Kimberly-Clark Europe, that’s been doing it. Jean Yves Charlier, president of Equant Integration Services U.K. agreed that today’s challenge is becoming global, and to help his people cope with this new reality he supplies them with customer information on-line in real time in English along with a publication telling them what they have to accomplish in the next three years.
But there are dangers which demand great care when switching from well known local risks to less familiar ones in new countries, warned Angel Corcostegui, first vice chairman and CEO of Spain’s Banco Santander Central Hispano. Corcostegui said his bank controls 20% to 25% of the market in Spain and has been aggressively investing in banks in Germany, France, Scotland and elsewhere. Corcostegui believes small and medium size banks in Europe will gradually disappear, with the bigger surviving banks becoming ever more ferocious competitors.
State and public banks in Europe are vanishing as the industry moves ever deeper into privatization, said Giuseppe Zadra, general manager of the Italian Banking Association. Zadra foresees some sort of cross-border consolidation in European banking following on the heels of investment banking which he says is already Europe-wide. He also sees European banks turning into financial conglomerates covering all their customers’ needs except insurance.
Some European banks are currently selling insurance to their customers on whom they’ve already done credit checks, noted Joel Aronchick, President and CEO of the Chubb Insurance Company of Europe S.A. At the same time, he said, today’s insurance buyers are much more sophisticated and insurance companies are eager to take the business at almost any price.
It is impossible to measure the demand for information today, said William Atkins, managing director, corporate finance, of the telecoms group at Morgan Stanley Dean Witter U.K. By the end of the year, he said, data traffic will equal voice in Europe and will rapidly outgrow it because although people are communicating more, they’re not talking more. The Internet, he noted, breaks down the old hierarchical business structure. Anyone can communicate with anyone else without asking for permission. Capital markets are eager to finance telecoms, Atkins added, and as a result they have been running up the price of new entrants moving into the European telecommunications business.
Investing profitably in European equities today demands a new way of thinking said Michel Fleuriet, President of Merrill Lynch France. Investment strategies are rapidly shifting from purely domestic to European equities, he said, with emphasis on specific market sectors and their potential for growth. This is creating new investment benchmarks in which liquidity is proving more critical than performance. The restructuring of European portfolios and asset allocation is happening, Fleuriet added, but not as fast as expected. Transforming country markets into a European one will take time, he said, and involves sensitive matters such as the integration of European exchanges and their clearing and settlement facilities. At the same time, Fleuriet believes, the need to create new rules of law governing European-wide investing is driving individual markets to consolidate into a virtual European exchange.
Creating a winning business strategy in Europe’s evolving new marketplace is a daunting task with no end currently in sight. But if you want to have a better than even chance of being alive and well in the years ahead, says John Sherriff, managing director, European gas and power trading at Enron Europe, put your money on smart, fast-moving young people because brains in today’s rapidly changing business world will beat experience every time. "Does speed kill?," asked Sherriff, who said he came to Enron from a company run by accountants and lawyers. "Yes it does. It kills the slow."