State Created Barriers to Exit: The Example of the Acquisition of Alstom by General Electric

Nicolas Petit, March 20, 2016

This paper seeks to understand the competitive impact of State restrictions to M&A transactions that target domestic corporations. In the economic literature, a rich body of papers has examined the impact of State restrictions in terms of market access, international trade and FDI. In contrast, the consequences of State restrictions in terms of economic competition remain poorly understood. To discuss the competitive effects of State restrictions to M&A transactions that target domestic firms, the present paper offers a case study of the takeover of the French company Alstom by the U.S. conglomerate General Electric (“GE”) in 2014, and of the measures adopted by the French Government to undermine it. This case is interesting. Unlike in the conventional scenario where Government intervention leads to prohibit the transaction, the Government interference did not kill the GE/Alstom transaction. Rather, in GE/Alstom, the French Government re-engineered the initial transaction. In lieu of an “absorption” of Alstom by GE as initially envisioned, the parties were forced to seal an “alliance.” Our case-study shows that State interference may influence the competitive conditions in the market. In particular, we advance a counterintuitive idea. While the traditional market access literature would lead to envision State interference as a form of measure that protects the domestic firm, we show that State interference can also harm the dome