France is perceived as being protectionist about acquisitions of French companies by foreign groups. Between July 2005 and July 2006, the French government several times said it would intervene in the possible outcome of tender offers on French companies, or those perceived as such.

In July last year, it opposed the rumoured tender offer by PepsiCo for Danone; at the beginning of this year it rejected Mittal Steel's tender offer for Arcelor and arranged the wedding between Suez and French state-owned Gaz de France in the face of a perceived imminent tender offer by Enel on Suez. For many commentators, this attitude reflects France's tendency to protect whatever is French, including language, wine and cheese. EU Commissioner Joaquin Almunia said: "The interventionism of the French government is not suited to the needs of our current world." Reality, however, is different. With €4bn of foreign direct investments last year, France ranks as the fourth country in the world behind the US, China and the UK that welcomes foreign investments, particularly through acquisitions of French companies. Indeed, 421 French companies were taken over by foreign investors last year for a total of €37bn, which completes a five-year period during which more than 1,900 French corporations were acquired. In France, more employees work for foreign groups than in the UK, Germany or the Netherlands, while 45% of the shares of the CAC 40 corporations are owned by foreign investors. There are more foreign investment banks and foreign law firms active in M&A in France than in any other country in Europe. Is France really protectionist? The French government typically interferes in the context of hostile takeovers. An example of this dichotomy can be found last summer. Rumours of an unsolicited takeover bid by PepsiCo for Danone triggered not only a stiff reaction from the French government but also from the political parties, unions and opinion leaders. At the time, Taittinger, Baccarat, Société du Louvre, Champagne Cristal, Hotel de Crillon – all very French assets – were quietly sold by their shareholders to Starwood Capital, a US investment fund, without a reaction from anyone. Most, if not all, governments interfere when they consider the general interest of the country so warrants. The US prevented the acquisition of seven ports by Dubai investors and the acquisition of an oil company by the Chinese. Spain is struggling to prevent Endesa from being bought by German E.On. Italy intervened to prevent Dutch ABN Amro from buying Antonveneta bank. State intervention in a hostile context is not necessarily bad. It is the duty of a responsible government to ensure that its defence, police, energy supplies and media are not controlled by potentially unfriendly hands; to ensure that a sufficient level of research and development is produced in its country, thereby benefiting other sectors, companies and users; to ensure that billions of state subsidies do not end up enriching private investors. It is the duty of a government to protect the long-term view of a country's general interest. The limit to this line of reasoning is twofold. First, intervention should be limited to situations where the danger to the country's interest can be demonstrated, and, second, they should be reserved for exceptional cases, as commonly agreed by EU member states and defined by European regulation when the acquirer is an EU company.