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Wednesday, 9 February 2011

Good buy!! The Netherlands ltd. runs the risk of being sold out! And how bad is that…

House for sale
You can read it on the sign
House for sale
It was yours and it was mine

The Netherlands is a very small country:only about half the size of New England in the USA. But with 17 million inhabitants it is also a very densely populated country and due to its enormous economic activity, it is considered to be the 10th economy in the world.

This economic activity is achieved by a top 3 position in the world in agriculture, a considerable manufacturing industry and a very large position in financial services, with three banks that belong to the Top 75 of the world.

The excellent infrastructure on rails, roads and water and the Rotterdam Port (still one of the five largest ports in the world for transshipment) make The Netherlands the mainport for transshipment of goods to the rest of Europe. Also the friendly corporate tax rates and internationally oriented and multilingual population make it a very suitable country for foreign investors and companies.

Although this has many advantages for the Dutch economy, this also comes with a disadvantage. Dutch manufacturing and services companies are often subject to friendly and hostile take-overs, as they are in many cases efficient, profitable and not overprized, compared to companies in Britain, Germany and the USA. The list of important Dutch firms that have been taken over by foreign companies over the last 5 years is quite impressive. Among the most important ones are:

Energy supply
-         Nuon
-         Essent

-         Draka (cables)
-         Nedcar (automobiles)
-         MSD/Organon (farmaceuticals)
-         Corus Steel
-         Numico (food stuffs)
-         Grolsch (Beer and beverages)
-         Hagemeyer (spare parts)
-         DSM (dept. of bulk chemicals)
-         Ahrendt (office supplies)

-         ABN Amro

-         KLM (airways)
-         Connexxion (local transport)

This competitiveness of our companies and the fact that it makes them good candidates for take-overs worries some people.

Wim van der Leegte, CEO and founder of the large Dutch manufacturing firm VDL in Eindhoven (7100 employees), states in an interview with the Dutch financial paper “Financieel Dagblad” (warning: the text of this link is in Dutch)
“We should not want as a people that all companies are sold to foreign investors. I am glad that Draka Cable is sold to Italian investors (Prysmian), instead of the Chinese. But it makes me a little bit sad that decisions on the future of the company and the employment in The Netherlands are taken in Milan from now on. You should cherish your national industry. This doesn’t happen in The Netherlands”

Also the take-overs of the Dutch energy companies Nuon and Essent and farmaceutical company MSD Organon disturb Van de Leegte:

“The energy prices are now set abroad. And for Organon (that was sold to Schering-Plough in 2007 by mother company Akzo Nobel) applies: If the Dutch government would have had 10% of the shares in Akzo Nobel, the sale of Organon would not have happened. The R&D activities would have remained in The Netherlands, instead of being transferred to the USA. A lot of highly qualified research jobs would have been preserved”.

This opinion of Van der Leegte is of course strongly inspired by the credit crisis and the current hard times for companies in The Netherlands and abroad. And he does have definitely a point here. Also I would add that you should not squander your companies and technology to multinationals and countries that only use these take-overs to obtain state-of-the-art technology or to shut down the competion.

On the other hand: research over the last hundred years pointed out many times that shielding your companies in a protectionistic way does make them weaker and less competitive. Stiff competition and the risk of being taken over makes companies rise above others that don’t have competition.

Although French car manufacturers Renault and Peugeot-Citroen have improved strongly over the last few years, the product quality and reputation of both state enterprises has been extremely bad in the (recent) past. This was caused by a mixture of excess union influence, low work ethic, lacking quality control and having no real competition in France. As the state always foots the bill, the need for being competitive is often missing within state enterprises.

The same happened with the big three GM, Ford and Chrysler in the American car business. These companies were no state enterprise, but they all “profited” from protective measures like import levies, benevolent legislation and a “buy American” ethic within the department of defense. When the Japanese and Korean car brands entered America, they came, saw and conquered until these American car brands were on the brink of extinction. Ford and GM both recovered, but Chrysler remains a story that might not have a happy end.

Therefore, sometimes with pain in my heart, I must say: let the door open for international companies to buy our companies. The best way to prevend this from a Dutch point of view is to be so strong and so competitive that our companies are too expensive to buy. As it are almost always the strongest companies that take over and the weakest companies that are overtaken!


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