This article has been written by Yahaan Heerjee pursuing the Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from LawSikho. This article has been edited Amitabh Ranjan (Associate, Lawsikho) and Dipshi Swara (Senior Associate, Lawsikho). 


Acquisition in today’s world plays a major role in turning the tables. A powerful organization acquiring another organization helps “rise to the challenge of building a world that works” is rightly stated as GE’s Purpose. Acquisitions that take place may be political, dominant in that sector, inter alia for industrial growth. 

The General Electric Company is an American multinational company, founded by Thomas A. Edison in 1889. The General Electric Company is notable for its work in the Power sector, Renewable energy sector, Aviation industry and Healthcare industries. The General Electric Company has been in existence for the past 125 years since the Edison era of the 1890s, serving for a bright and better future. The General Electric Company is a leading icon in delivering solutions across Additive manufacturing, material science and data analytics.

Alstom SA is a French company that is involved in the development and marketing of mobility solutions that provide sustainable foundations for the future of transportation. The product portfolio of Alstom ranges from high-speed trains, metros, monorail and trams to integrated systems, customised services, infrastructure, signalling and digital mobility solutions. Alstom has 150,000 vehicles in commercial service worldwide.

This article emphasises on the acquisition of Alstom by the General Electric Company and how it has impacted France and its allies.

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Why did Alstom acquire GE?

The General Electric Company was set on acquiring Alstom’s grid and power business. The completion of the transaction was followed by the regulatory approval of the deal in over 20 countries and regions including India, EU, USA, China, Japan and Brazil. This acquisition was a significant step in boosting the General Company’s transition from one sector to another. 

  • On the acquisition of Alstom, it brought along; technology, its persisting global capability, the concrete foundation that it had formed as well as the talent it had built over time. 
  • The aforementioned features have strengthened the General Electric Company’s core industrial growth. The technology Alstom offered is now taken over by the General Electric Company which delivers one of the most comprehensive technologies in the energy sector. 
  • Another reason for the acquisition of Alstom is that it’s a preferred bidder along with the General Electric Company for their collaboration on the cycle plant project in Asia which includes the use of two GE 7HA gas turbines, one Alstom steam generator and two Alstom HRSG’s. 
  • In addition to this, Alstom was the preferred bidder for Arabelle steam turbines in nuclear reactors in the United Kingdom; it is also preferred for boilers, steam turbines and generators for a clean coal project in the Middle East
  • Last but not least it has successfully delivered India’s first 800 kV High Voltage Direct Current (HVDC) power transformer for the Champa-Kurukshetra project which led from Chhattisgarh in Central India to Haryana in Northern India. 

The rail signalling business owned by the General Electric Company was sold to Alstom for approximately $800 million. The General Electric Company had stretched its arms not only to the energy sector but had also consolidated all digital capabilities across the company to GE Digital which provides customers with topmost industrial solutions and software. The company after its acquisition and expansion in the digital industry is making its mark and winning in the marketplace as well as yielding strong financial results.

Is the deal politically inclined?

France’s industry minister, Arnaud Montebourg took the first step at a state dinner at the White House. Clara Gaymard, the head of General Electric Company’s operations in France and part of Hollande’s Washington entourage met with Arnaud Montebourg at the US Chamber of Commerce with a keen interest in France’s Alstom SA. This brief conversation was not intimated by Monteourg to his officials and multiple secret negotiations went through. The General Electric Company formally announced a $17 billion bid for Alstom’s energy assets, accounting for almost three-quarters of its revenue. The negotiations were covertly taken place from the French government as well as Alstom’s own executives. Alstom CEO Patrick Kron and Immelt went about discussing a future for the companies together. 

Thereafter, Immelt dispatched a team from his energy department to conduct due diligence and to make sure there was nothing in harm’s way. Alstom made its mark in the eyes of Immelt with positive feedback and that led to the beginning of this acquisition. The negotiations were kept from the French government for the longest time. The deal was not taken in good taste by the French government as it would cost millions of jobs and Patrick Kron had not pitched this to the minister concerned. Alstom was at the verge of bankruptcy and the French government came to its rescue. Since Alstom was an industrial icon in the transport and nuclear sector, the French government kept a close eye on Kron. The French government’s only concern was the loss of jobs and independence in the nuclear sector but after a lot of chaos, the deal came through.

The French interference

Alstom is a company based in France acquired by an American-based company called the General Electric Company. When offers for mergers and acquisitions are put forth, the board of the company plays a very crucial role in determining whether to accept or reject the offer. Alstom’s board took up to a month to decide whether it would be beneficial to accept or reject the offer.

The concept of Laissez-Faire was not practiced while this deal came through. The decision making of corporate matters is frequently intervened by the French government. Alstom catered to the increase in employment of the country as well as the country’s energy independence. The French government was sceptical of this deal as the acquisition by a Connecticut-based company could jeopardize energy independence as well as millions of jobs. These obstacles were taken into consideration which resulted in Alstom forming a committee of independent board members to examine the General Electric Company’s proposal. The General Electric Company was not the only one competing to win. The rival company, Siemens, agreed to make an offer only if Alstom permitted it access to company data as well as conduct due diligence. This did not work in either of their favour even though the officials in France had pressed for more time to allow Siemens to form its own bid.

The deal resulted to be practically perfect and beneficial for both the companies as the General Electric Company’s deal was strategic and was exemplary in its industrial merits. 

France and the European Union

The European Union plays a crucial role in the economy of the European countries. France shares a complex relationship with European integration and faces many hurdles on the way. The frequent intervention by France on the acquisition of Alstom was not merely commercial. The European Commission reviewed the agreed transactions under the European merger control rules. The basis for European merger control rules is council regulation which makes sure to prohibit mergers and acquisitions which would notably reduce competition in the single market. In a single market, dominant companies are likely to raise prices for consumers which would not be feasible in the long run. In order to comply with state-aid rules, it was not easy for France to cope with the European Union budget rules. A problem that arose was for France to bring down its deficit from 4.3% to 3% as mandated by the European Union law by 2015.

The French capital

The management team and the investors run the show. It is imperative to have the investors’ confidence and the management team on board when a divestiture takes place. Bouygues had sold Alstom’s 20 percent stake to the French state. France would buy its stake “at the market price with a standard discount, on condition that this price is higher or equal to the equivalent of a theoretical adjusted price of 35 euros per share,” as stated by Bouygues. This divestiture could jeopardize France’s energy independence which was borne by Alstom. 

This acquisition by General Electric Company gives it financial relief after its credit dried up during the 2008-09 financial crisis. Bouygues lent Alstom’s stock commanding 20% of the voting rights to the French government as well as two board seats. This gives the government an upper hand to exercise an immediate role as the company’s main shareholder. The government had a time frame of 20 months with the option to buy 20% of Alstom from Bouygues, who currently holds 29.3%, or with a 2.5% discount, if the government has not acquired 20% by then, it can buy up to 15% from Bouygues with a similar mark-down or the quoted share price. Olivier Bouygues and Bouygues S.A would remain board members of Alstom. The loan taken by Alstom would be free of charge to the French government as well as subject to state regulatory and shareholder approval.

The collaboration of two industrial icons was a boon to each of them respectively. The times are changing and to keep up with the pace, the technology sector is always way ahead of time. The most important sectors like technology, transport, nuclear and energy are the foundation on which the economy works and caters to its clients. To provide a sustainable foundation and smarter mobility worldwide is what the General Electric Company and Alstom are based upon.



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