The GE Coup
It’s no coincidence that the phrase ‘coup d’etat’ is a French one, however, with an American multinational looking to secure a major French industrialist; the outcome is rather surprisingly in favor of l’Americain .
The GE, Alstom tie-up is of major impact to GE’s footprint in Europe. In what looks like what will be a successful acquisition, GE is securing one of the major European players in power equipment in Europe and certainly also a major player on the world stage. In order to remain competitive in this landscape, given the diverse characteristics of the grid landscape globally, consolidation will be the major driver of growth for companies active in this area. Europe, the US, and many other areas where the infrastructure is established are going through a renewal phase whereby there is a need for capacity in the medium term. Scale advantage will be a major determinant of success further down the road and may even allow the largest players to increase their footprint in the growth markets in Asia and Latin America.
With the French government giving the tie-up a positive nod (after much wrangling and negotiating), it would appear that a merger is now imminent subject to regulatory approval. GE has been able to secure a solid player in the European and international power equipment sector and this merger will definitely benefit General Electric in many ways. The major assets that GE is gaining from this are mainly in the turbine industry as well as the power equipment industry. GE and Alstom have much more complimentary business areas when compared to Siemens (and Mitsubishi) who compete head to head with Alstom in many more areas.
Though not as all-encompassing as GE would have preferred to have it, the current proposal does allow for GE to grow its business in collaboration with Alstom through joint ventures protecting the interests of the French government and stakeholders in France.
Securing the Turbine arm of Alstom is a major coup for General Electric and we believe that the consolidation in the wider energy equipment manufacturing industry is far from over.
