If you’re a Daily Mail or Daily Telegraph reader stop reading now. If you’re looking for an update on French skipper, Antoine DuPont’s, eye-socket injury you can stop now too and call my maxillofacial surgeon cousin instead. But…. if you’re looking for an investment view that might surprise you then keep reading. And, it’s not just my view. Let’s start with the biggest private equity player on the planet. Blackstone’s billionaire CEO, Stephen Schwarzman said this week that “France has been the biggest beneficiary of Brexit”. Arguably, Brexit is a bit too narrow a lens to look through and you might think Schwarzman is really only highlighting financial services. However, his Bloomberg TV interview referred to France as the “best of the European countries” and how Blackstone are expanding their office in Paris. Crikey… there will be many investment veterans who will struggle with that observation but look closer and one can see France winning on many fronts.
The perennial image of France as a capitalist-unfriendly paradise for socialist ‘woke’, punchy pensions and labour strikes took a bit of a bang earlier in the year when global rich lists were published. Topping the male and female categories for world’s richest billionaires were two French citizens. Luxury visionary, Bernard Arnault, of LVMH has rolled up $200 billion of wealth and brands over the decades while L’Oreal heiress, Francoise Bettencourt Meyers, is another $85 billion beneficiary of French dominance in the world of luxury goods. In fact, just 5 French companies(Hermes, LVMH, Essilor, Kering and Dior) have a combined market value of over $1 trillion and account for 80% of the value of the 20 largest public luxury companies globally. The strategy of focusing on long-term premium brand build has paid off spectacularly with possibly even greater riches ahead. Indeed, long-term strategic thinking must have clocked the prospect of two thirds of the world’s middle class being located in luxury-obsessed Asia by 2030. This is not the only long-term French bet paying off.
Some might be surprised that Blackstone have put France ahead of Germany in Europe but the world changed when Ukraine was invaded by Russia. The German strategy of appeasing Putin and guzzling its oil and gas has been a spectacular own-goal and exposed another French strategic win. The Fukushima nuclear accident in 2011 pushed Germany to commit to decommissioning its nuclear power plants while France stuck with its 68% exposure to nuclear electricity generation. The world on a climate emergency footing and reconfiguring its power sources can only look on in envy at France right now. But there’s more….
Go on, admit it; we’re all a bit jealous of France on an endless TV loop of sporting mega-events…. FIFA World Cups, Olympics and Rugby World Cups did not happen by accident. Again, the French played hard and paid up to win hosting rights for these events because they could see the long-term value of live events in a noisy digital multi-screen world. Sport is for instant gratification, not customised viewing schedules. However, investment in sport has been very strategic. Moreover, as live concert music tickets, sporting tickets and festival tickets continue to rocket on “experiential” demand premia, the value of sport(even gaming) as an engagement tool is almost unmatched. It is no accident that Steve Ballmer’s first purchase after leaving Microsoft was the LA Clippers. The $2 billion price was the subject of some sniggering at the time. Not now.
In fact, my own personal experience of having breakfast with Chelsea FC owner, Todd Boehly, way back when he looked after the money of America’s richest financiers was my fascination about what he’d do next as a thirty something whizzkid. Yep, he went for sport investment and built a $6 billion empire. The French ‘get’ that most human beings are programmed for sports and games engagement and see it as a great opportunity to sell brand France, its goods and services. Closer to home, it is striking to see marketing technology company, XtremePush, go out and buy a gaming franchise, Thunderbite, and declare it a game-changer. Back to France, it would be mistaken to think a nuclear break and a historical appetite for champagne and sports leisure explains success. We can learn more from the French. Literally.
France is an educational powerhouse too. A top 5 ranking globally for its education system is no accident. We associate France with the Arts and Humanities but a STEM focus (maths, science) and emphasis on critical thinking(vs learning by rote) has prepared its workforce well for the digital age. But, it’s not just technology and derivatives trading who have benefitted from France’s digital dividend. France has identified other commercial sweet spots, particularly where scarcity(think luxury) is involved. Is it any surprise that two of the largest water companies on the planet are French(Suez and Veolia)? Also, as the world economy re-constructs its industrial base for cleaner manufacturing check out the order books for giant construction companies like Vinci and Lafarge-Holcim. That cleantech manufacturing revolution is in full swing in Europe but there is another challenge – an ageing population. Guess who’s thinking ahead?
Two of the top three nursing home operators in Europe are French. In fact, one of them, Orpea, is the largest operator of nursing home beds in Ireland and a good example of a potential acquiror of smaller healthcare operators. In the world of start ups ‘exits’ or trade sales, predatory acquirors are always at the top of investor queries and considerations. So, for both founders and investors, dare I suggest we keep a closer eye on France as an opportunity and not just a World Cup threat!