{"text":[[{"start":8.36,"text":"The deal was supposed to create the “Airbus of rail” — a mega-merger bringing together parts of France’s Alstom and Siemens of Germany. In 2017, Alstom’s then CEO pitched it as a chance to create a “European champion”."}],[{"start":21.28,"text":"But European regulators nixed the proposal, seemingly sounding a death knell for attempts by the continent’s largest companies to combine forces to compete with the US and China."}],[{"start":31.3,"text":"Now the idea is back. The EU unveiled new merger guidelines this year designed to ease the way for corporate tie-ups. “We need European champions,” Commission president Ursula von der Leyen said this year."}],[{"start":43.88,"text":"But what is the recipe for a European champion? The FT conducted an anonymous survey of more than 30 leading M&A banks, law and PR firms and executives asking which companies they would merge to create best-in-class European champions in strategic sectors ranging from tech to defence to energy."}],[{"start":61.96,"text":"The answers, which range from long-rumoured or previously tried deals to very creative and borderline crazy suggestions, illustrate both the potential and the extraordinary complexity of corporate tie-ups as a means to make Europe more competitive."}],[{"start":76,"text":"The change in tone in Brussels reflects the growing realisation that the region faces a widening competitive gap with duelling superpowers. EU economic growth over the past decade has trailed behind the US and China, with the EU’s average annual real GDP increase of 1.3 per cent to 1.5 per cent behind the US’s 2.2 per cent and China’s 5 per cent."}],[{"start":98.76,"text":"While Washington has unleashed aggressive trade policies and its tech sector dominates innovation such as AI, China is pursuing long-term industrial and raw materials expansion, with its companies challenging traditional European strongholds such as carmakers, renewables and chemicals."}],[{"start":null,"text":"

"}],[{"start":115.24,"text":"“As a European, you feel the squeeze between the east and west more now than ever before,” says Mike Doustdar, the CEO of Danish weight-loss drug pioneer Novo Nordisk."}],[{"start":125.8,"text":"Against this backdrop of rising competition and persistently weak economic growth, Paris and Berlin have pushed Brussels to rethink the way the bloc polices mergers to give them the size and scale they need to thrive."}],[{"start":137.82,"text":"The merger guidelines presented in April reflect calls for more M&A openness, stressing the importance of considering scale, innovation and resilience when examining deals to allow the region’s companies to better compete globally."}],[{"start":151.48,"text":"At present, strategic sectors such as telecommunications, defence, energy and banking are largely fragmented across the continent. Putting some of them together through mergers, the argument goes, would give European companies sufficient scale to better compete globally with larger balance sheets, greater purchasing power, bigger research and investment budgets, potential cost savings and higher profits."}],[{"start":175.24,"text":"“Champions pull entire economies forward — they lift productivity, drive capital markets and are better positioned to capture economies of scale,” says Tunde Olanrewaju, European managing partner of McKinsey."}],[{"start":175.74,"text":"Seven fantasy mergers"}],[{"start":176.24,"text":"Deutsche Telekom and Orange"}],[{"start":null,"text":""}],[{"start":191.88,"text":"Why it would make a difference: Europe’s telecoms industry currently has about 40 large companies in the region. Operators have long argued that the scale and market fragmentation hinder investments in technology and infrastructure. In the survey, Germany’s Deutsche Telekom (€141.4bn market capitalisation) is mentioned most often as the company to lead such consolidation with the likes of Orange (€41.3bn) in France or Spain’s Telefónica. A German-Franco deal would create a company that serves more than 16 European markets with mobile services, while allowing the companies to combine backroom teams and infrastructures to drive efficiencies and invest further in improved technology such as 6G."}],[{"start":235.36,"text":"Why it might not happen: Both the German and French companies count their respective governments among their shareholders, meaning any deal would be likely to invoke serious geopolitical and national security considerations. The merger would also not deliver much in-market consolidation, something viewed as essential to higher returns by telecoms groups, as the two companies only compete in Poland and Slovakia. Deutsche Telekom has also been focused on a possible merger with its giant subsidiary T-Mobile US."}],[{"start":235.86,"text":"Airbus and Saab"}],[{"start":null,"text":""}],[{"start":263.56,"text":"Why it would make a difference: As Russia’s war with Ukraine continues, the bloc urgently needs to scale up weapons manufacturing while also dramatically reducing fragmentation between defence platforms such as fighter jets and tanks. In the survey, Franco-German planemaker Airbus (€156bn) — often cited as a successful complex pan-European merger — was frequently mentioned as a key mover with the scope to merge with European peers including Saab (€29.7bn) of Sweden, Italy’s Leonardo or France’s Thales to bolster defence and commercial aircraft operations."}],[{"start":300.44,"text":"Why it might not happen: Previous attempts to team up between defence and aerospace companies have foundered. Cross-border alliances have often been dogged by political and industrial divisions, as European countries focus on their own national defence companies. The war in Ukraine has made national governments even more protective of their in-house capabilities, as illustrated by the recent collapse of the Franco-German fighter jet programme."}],[{"start":300.94,"text":"Iberdrola and Enel"}],[{"start":null,"text":""}],[{"start":324.335,"text":"Why it would make a difference: Creating bigger energy champions could potentially cut costs for European manufacturers, lessening the competitive disadvantage of their high energy prices compared with American and Chinese rivals. Spain’s Iberdrola (€131.2bn) was often named as a main puzzle piece for utilities consolidation with Enel (€91.5bn) of Italy because it would create a Europe-based energy transition powerhouse with resources to invest in renewables, transmission and digitisation to bring down energy prices. Eon of Germany would be the other dream target. On oil and gas, TotalEnergies could potentially make a move on struggling UK rival BP and Spain’s Repsol."}],[{"start":367.741,"text":"Why it might not happen: Control of power sources and infrastructure in Europe remains highly sensitive and rooted in national pride, so any move would be likely to trigger government intervention. Any deal would also face especially tough antitrust scrutiny, given current concerns about high utility bills for consumers and energy costs for companies going even higher. Iberdrola and Enel as well as Eon have a history of battling over various M&A deals in Europe, showing each side is reluctant to forfeit control."}],[{"start":368.241,"text":"Deutsche Bank and BNP"}],[{"start":null,"text":""}],[{"start":396.52,"text":"Why it would make a difference: Policymakers at a national and EU level have long been calling for more consolidation across the EU’s fragmented banking market to close the gap with bigger US rivals. By combining Deutsche Bank (€66.8bn), Germany’s biggest bank, with French rivals BNP (€113.6bn) or Société Générale, you could create a pan-European giant with both corporate and investment banking businesses and complementary European retail networks."}],[{"start":426.36,"text":"Why it might not happen: Cross-border banking deals have often triggered political opposition, such as the German political backlash against UniCredit of Italy’s swoop on the country’s second-biggest lender Commerzbank. European regulatory fragmentation also remains a key obstacle. Any combination would also trigger concerns about too-big-to-fail risks and lending priorities."}],[{"start":447.08,"text":"ASML and Mistral"}],[{"start":null,"text":""}],[{"start":448.241,"text":"Why it would make a difference: Tech is an area where Europe significantly trails the established American giants. The exception is ASML (€561.2bn), Europe’s most valuable company, which has a tight grip on the market for the lithography equipment needed to manufacture cutting-edge chips. Ideas from respondents for the Dutch powerhouse ranged from a tie-up with Europe’s biggest chipmakers to a re-merger with its former parent company ASMI to expand its chipmaking equipment portfolio. It could also increase its already hefty stake in French AI start-up Mistral (valued at €20bn) to create a true Europe-based AI competitor."}],[{"start":487.52,"text":"Why it might not happen: ASML has historically been reluctant to make large acquisitions, only rarely stepping in to secure supplies of critical components. Experts say any combination with European chipmakers would make little sense for either party. And while ASML’s initial €1.3bn investment in Mistral was viewed as a means to strengthen European tech sovereignty, a merger of two companies with entirely different core businesses would be unorthodox."}],[{"start":513.64,"text":"Sanofi and Bayer"}],[{"start":null,"text":""}],[{"start":514.459,"text":"Why it would make a difference: In a pharmaceutical industry largely dominated by US companies, survey respondents often mentioned France’s Sanofi (€93.2bn) as a potential match for players including Bayer (€48.2bn) of Germany or the UK’s AstraZeneca or GSK to strengthen drug pipelines and gain size."}],[{"start":534.2,"text":"Why it might not happen: Merging with Sanofi would be a tough sell; its struggles with internal research and development helped oust former chief executive Paul Hudson this year, and its hit anti-inflammatory drug Dupixent is soon to lose patent protection. Pharma mega-mergers have also fallen out of favour with investors. After the FT reported that AstraZeneca had held talks with US-based Bristol Myers Squibb, the Anglo-Swedish group’s shares tumbled and the deal was shelved. Bayer, meanwhile, is still trying to sort its huge Monsanto-related lawsuits."}],[{"start":534.7,"text":"Siemens and Schneider"}],[{"start":null,"text":""}],[{"start":568.794,"text":"Why it would make a difference: A deal between the German multinational Siemens (€213.7bn) and competitors like Schneider (€165.9bn) in France or Switzerland’s ABB could create an industrial and engineering automation giant. Such a company could have the scale and product diversity to compete with American rivals on electrification, automation, digitalisation and powering data centres."}],[{"start":595.9,"text":"Why it might not happen: A transformative merger at Siemens, which has spent time focusing the business on industrial automation and software through spin-offs and targeted acquisitions, could spark an investor backlash. While all three companies have seen their stocks benefit from the megatrends of AI and electrification, they have each pursued different strategies to tap those demands, setting up a clash in direction and management resistance."}],[{"start":620.4,"text":"The respondents to the FT’s survey largely agreed on the need and the opportunity for more relaxed antitrust rules. But the broad majority expressed scepticism that their imagined deals would ever be allowed."}],[{"start":630.52,"text":"Competing national interests among the 27 member states, a lack of a true single market and a disconnect between proposals to relax antitrust rules and real evidence they’ll follow through remain key hurdles to the formation of European champions, according to bankers, lawyers and communications advisers who spoke to the FT."}],[{"start":648.64,"text":"“We don’t have a single market in many sectors,” says Sir Jonathan Faull, a former senior official at the EU’s competition division and now at Brunswick Group. “We are in a halfway house with some Europeanisation but still with a lot of different national regulations across the member states. That makes it hard to give potential European champions the integrated economies of scale at home that they need.”"}],[{"start":670.96,"text":"A first obstacle is politics. While the bloc’s politicians often voice support for the creation of European champions in speeches, they are reluctant to give up one of their own national champions to allow for a European one."}],[{"start":683.134,"text":"For example, Germany has fiercely opposed a takeover of the country’s second-biggest lender Commerzbank by Italian rival UniCredit, a cross-border banking deal viewed as a test for more consolidation across the continent."}],[{"start":697.12,"text":"When push comes to shove, politicians often worry about headquarters moving abroad, jobs disappearing or factories closing, especially amid economic stagnation and the rise of populist parties. “You have no idea how petty the politics gets when it comes to local job losses in a merger conversation,” says one lawyer advising on a pan-European deal."}],[{"start":717.84,"text":"Another political hurdle is the mixed messaging from the EU. While von der Leyen is signalling a clear openness towards more scale and European champions, senior European competition officials, including competition chief Teresa Ribera, have dismissed ideas of a revolution brewing. “It’s clear that Berlin has influenced the rhetoric. But in the end, it’s Brussels that will make the actual decisions,” says another Brussels-based M&A lawyer."}],[{"start":741.52,"text":"Instead, Ribera consistently points out a more important obstacle: the lack of a true single market in many of the sectors where consolidation would make sense. While companies can easily sell goods freely to the EU’s 450mn consumers, businesses still encounter 27 different tax systems, labour laws, corporate rules and regulatory burdens."}],[{"start":762.52,"text":"“Scale is not only about the size of companies; it is about the size of the market in which they operate,” Ribera told a room full of competition officials, lawyers and executives before the summer. “We cannot expect global champions to emerge from 27 fragmented markets.”"}],[{"start":778.68,"text":"Anna Lyle-Smythe, who leads the Brussels office of law firm Slaughter and May, says “unless there is greater flexibility, the ambition of fostering globally competitive European firms may remain difficult to achieve through merger control alone”."}],[{"start":790.322,"text":"Some also point out that deals are not always a net positive. Some 70 per cent of mergers and acquisitions fail to create shareholder value, according to the Harvard Business Review (though other more recent studies give a more optimistic view)."}],[{"start":803.92,"text":"The reasons include buyers overpaying, inadequate due diligence and poor post-merger integration, according to advisory firm Acquisition Stars, citing post-deal stock declines, missed synergy targets and divestitures within five years."}],[{"start":820.2,"text":"And regulators’ concerns about market concentration or the formation of duopolies or monopolies are real, with studies showing that the cost savings from mergers are not necessarily passed on to consumers."}],[{"start":829.004,"text":"Even so, there are European megadeals on the horizon. These include Finnish firm Kone’s planned €29.4bn takeover of TK Elevator of Germany to create the world’s biggest elevator company, which is seen as a litmus test of the region’s new antitrust policy. There is also the planned space merger between Airbus, Thales and Leonardo to compete against global rivals including Elon Musk’s SpaceX."}],[{"start":852.299,"text":"But there is yet to be long-discussed cross-border consolidation between strategic sectors such as telecoms or defence. If such deals do not materialise, Europe risks becoming a museum, says one top European-born banker at a big US firm, who warns that “the continent needs to get over the idea that ‘small is good’”."}],[{"start":871.8,"text":"European regulators need to allow consolidation and focus on the sectors it does well and scale those such as high-end luxury and engineering and medtech, he adds. “Otherwise China is going to eat us for lunch.”"}],[{"start":883.152,"text":"Additional reporting by Ivan Levingston, Kieran Smith, Aanu Adeoye, Tim Bradshaw and Rachel Millard in London and Ian Johnston in Brussels."}],[{"start":892.8,"text":"Photographs: Getty Images, Bloomberg and Reuters"}],[{"start":898.2,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1788755949_9528.mp3"}