The Trouble With German Nationalism
If British telecom giant Vodafone succeeds in its attempted hostile takeover
of German telecom giant Mannesmann, the deal will be, by some measures, the
biggest deal in history (non-inflation, non-bull-market-adjusted, that is). And
it will also be a crucial step in turning Europe into what it's supposedly well
on its way to becoming: a unified economic region.
Great Britain has refused to become part of the euro currency zone, so
there's something ironic about a British company serving as the avatar of
globalization, European-style. Nonetheless, it is as precisely that kind of
avatar that Mannesmann's management and workers are treating Vodafone. Even
allowing for the fact that companies trying to resist hostile takeovers will
say and do almost anything to make their would-be acquirers look bad, the
German reaction to the Vodafone offer has been striking for its vehemence and
the nakedness of its nationalism. Political leaders, union leaders, and
corporate leaders alike have all publicly attacked the deal as effectively
British imperialism.
This is not, on some level, exactly surprising. Until this year, after all,
nearly all European countries had regulations requiring pension funds to invest
most of their assets in companies based in their own countries. And Olivetti's
successful takeover of Telecom Italia this year was made possible in part by
the fact that Telecom Italia's attempted defense against the takeover involved
a prospective merger with Deutsche Telekom, a merger that would have been
unacceptable to the Italian government. In any case, it's not as if the United
States has no experience with this sort of thing, as evidenced by the hysteria
occasioned by Japanese companies' acquisitions of properties like Rockefeller
Center and Columbia Pictures in the late 1980s and early 1990s. (Of course,
since only huge inflows of foreign capital now allow us to fund our
current-accounts deficit, we should be thankful, not angry, that foreign
investors want to put their money here.)
Still, the fight over Mannesmann seems especially ironic. In the first
place, German companies have been among the most aggressive of global acquirers
in recent years, both in the United States and Europe. Daimler has bought
Chrysler, Bertelsmann has acquired a host of media and publishing properties,
Deutsche Bank bought Bankers Trust, and the list goes on. That's why, for all
the bluster, you probably won't see the German government actually taking any
political action to block the deal. And it's also why Germans should get over
the knee-jerk reaction that any foreign takeover necessarily means terrible
things for a German company.
The other factor that should be at play here, but doesn't seem to be, is the
recognition that foreign competition, whether in the direct form of competition
for consumers or the more indirect form of competition for corporate control,
is a very good thing, at least if we can take any lessons from the American
experience. Most of those Japanese acquisitions were complete bombs, but then
most acquisitions fail. The pressure created by those acquisitions, though, was
a good thing (as, in retrospect, the pressure created by the corporate raiders
of the 1980s was).
Mannesmann is not exactly a fat and happy corporation run by sleepy
managers. It has turned in a strong performance this decade. But when Vodafone
offers 240 euros a share for a stock that had been trading at 160 euros a share
and Mannesmann managers say that the offer is an insult, it makes you wonder
whether those managers really understand what shareholder value means. And it
also makes you think that they may be looking after their own interests more
than the company's. The impulse to rally to the flag may be understandable in
the face of an offer like Vodafone's. But from an economic perspective, it's an
impulse that should be resisted.
