A Perfect Frenchman, Part 3

The Man Who Tried to Buy the World: Jean-Marie Messier and Vivendi Universal
by Martine Orange

(Page 5 of 6)

When the right came back into power in 1986 on the basis of an election manifesto of privatization, the young inspecteur des finances was not forgotten. Friedmann recommended him warmly as an adviser to Camille Cabana, secretary of state in charge of privatization. But Messier was quickly disappointed. He soon realized that real power lay elsewhere, at the economy and finance ministry, then run by Edouard Balladur, a heavyweight figure in Chirac's government. When a ministerial reshuffle presented him with an opportunity, Messier dumped Cabana and, with the backing of Friedmann, hurried off to join Balladur at the seat of power. The right faced a problem, however. While the Chirac government approved of the free market, there were limits to its liberalism. With an underdeveloped French stock market, a lack of pension funds, and little domestic money available for investment, privatized French companies ran the risk of takeover by predatory foreigners. Messier led the handful of people at the finance ministry who set about reconciling the conflicting objectives of liberalizing the economy and preserving the French identity of the country's privatized corporations. It was his responsibility to ensure the jewels of French industry would not be plundered by foreigners once they were exposed to the stormy international capital markets.

Messier's staff revived the old idea of "core" shareholdings, or noyaux durs. A small group of friendly French investors would acquire large stakes in the newly privatized groups and take boardroom seats. These powerful alliances were intended to scare off hostile foreign bidders. In extreme versions, cross-shareholdings developed in which two companies would buy a stake in each other and their chairmen would sit on each other's boards. It was a system that seemed to offer protection and support, but which was riddled with conflicts of interest. The original idea was for these arrangements to last for two or three years, by which time the newly privatized groups would have become strong enough to fend for themselves. But once in place, the mechanisms stuck, and contributed to numerous failures of corporate governance. Board members often ended up fighting turf battles instead of maximizing value for all shareholders. The problem was worsened by the concentration of executive and supervisory functions in the hands of one man, the president directeur-générale. While their UK counterparts tended to split responsibilities between a chief executive and a nonexecutive chairman, a single imperious PDG, addressed as "Monsieur Le Président Directeur Générale," dominates most French boards, much like an all-powerful U.S. chairman and chief executive.

Messier would later defend the device. "The logic of the noyaux stables was to say, 'We are privatizing companies that are small and weak compared with their international competitors. We must give them a minimum level of protection when we throw them into the bath.' If there was an error at the time, it is not in the principle because we had to give them a way of defending themselves." He handled the privatization of some of France's best-known companies, including Saint-Gobain, Société Générale, and Paribas, the investment bank later acquired by Banque Nationale de Paris (BNP). It was a position of phenomenal influence that Messier used to its full advantage. The most powerful businessmen would arrive at the finance ministry, cap in hand, to negotiate a piece of the action. They would be greeted by a cherubic, rosy-cheeked Messier, who later admitted to fattening himself up to look older than his years. At first he watched the comings and goings of French industrialists with fascination, but he soon mastered the complex web of relationships that still characterizes the country's business life. Modest and still smiling, he listened and made himself available at all hours. Balladur displayed complete confidence in him, as did many leading industrialists. The media soon got wind of the young man in the finance ministry being credited with single-handedly reshaping the French business landscape.

When the possibility of the next step arose, all professional careers were open to him. By the time the June 1988 elections ended "cohabitation" - the term given to describe the situation in which the two branches of the French executive, the presidency and the government, are occupied by politicians from opposing political parties - Messier had received seventeen offers of employment, including one from Générale des Eaux. With the defeat of Jacques Chirac, then the incumbent prime minister and the center-right's candidate for the presidency, executive power had been reunified in the hands of the Socialists, led by François Mitterrand, who won a second seven-year term as president. The privatization program enacted by the Chirac government since 1986 was expected to grind to a sudden halt. France's returning Socialist Party had by then adopted a policy known as the "ni-ni" rule - neither privatization nor nationalization. For Messier, this meant that it was time to look elsewhere. His days of calling the shots from the finance ministry were over.

He had seen it all coming. In late 1987, before the defeat of the Right, he had decided to join Lazard Frères, the go-go merchant bank of the 1980s. After privatizing vast swaths of French banking and industry, he proceeded to privatize himself. Based in the chic Eighth Arrondissement, on the edge of the parc de Monceau, Lazard Frères called the shots in Parisian business. The bank existed in an atmosphere straight out of Balzac, with plush red sitting rooms from the Second Empire, ushers patrolling the corridors, warning lights flickering over the doors of occupied meeting rooms, and, above all, an atmosphere of ferocious jealousy and intrigue. Michel David-Weill, the chairman whose family controlled the bank, encouraged the internal competition: one way or another, the business would end up going to Lazard, he reasoned. Many found the atmosphere intolerable, but not Jean-Marie Messier. He passed the first few months at the New York office, where he learned about the "information superhighway" and the imminent convergence of television and telecommunications; but in 1989 he returned to France to exploit his political connections. At the tender age of thirty-three, he became a managing partner of Lazard Frères in Paris.

France is a country run by networks, and Messier's address book began to bulge. He would be seen at concerts, at the opera, in the smartest Parisian restaurants, and as the host of grand dinners and lunches in the bank's dining rooms. Aware that power in France was shifting away from the old administrative caste, Messier cultivated a more entrepreneurial set and became president of the Club of 40. This brought together forty entrepreneurs who were younger than forty years old when the club was founded. Messier argued that the club was the opposite of the old-style network: "My idea of networks is 'Let's get people talking who should logically succeed together and who don't know each other or have different specialities.' That is not the network in the sense of everybody being the same and working together because everyone is the same - that is the old-style network."4 Its members, who would meet at the Hôtel Raphaël at least once a month, included Patricia Barbizet, who would later become the right hand of François Pinault, founder of France's most prominent retail group, Pinault Printemps Redoute; Jean-Marc Espalioux, then finance director of Générale des Eaux; Philippe Germond, at that time a manager with Hewlett-Packard; and Agnès Touraine, then working her way up the Hachette publishing group. Several of its members would later become his most loyal lieutenants at Vivendi Universal.

At the same time, he continued to cultivate his media image. Philippe Villin, a friend from ENA who had become number two at Le Figaro, helped by inviting him to many of the breakfasts and lunches the right-wing newspaper organized with the leading businessmen of the day. During the summers he would be found at Villin's villa at Cavalaire, near St.-Tropez, where the newspaper's socialite director entertained the rich and powerful. Within a short time of arriving at Lazard, Messier styled himself as the linchpin of French finance. More than two hundred people were invited to celebrate his tenth wedding anniversary in 1993. The networking bore fruit. After seeing Messier at the Orchestre de Paris, Didier Pineau-Valencienne, chairman of Schneider Electric, hired him to advise on the electrical components group's $2.2 billion takeover of Square D, a U.S. company. After friendly approaches failed, Pineau-Valencienne, egged on by Messier, decided to launch a hostile bid, never before attempted by a French group in the United States. Then the biggest French acquisition in the North American market, the deal sealed Messier's place as one of the leading bankers in Paris.

After Square D, many of the bank's most sensitive dossiers landed on his desk. He helped Jean-Luc Lagardère, France's media-to-missiles magnate, recover from a disastrous foray into French free-to-air broadcasting, and Bernard Arnault to develop his luxury goods group. The right's victory in the 1993 elections and Edouard Balladur's appointment as prime minister, a post he would hold until his defeat by Jacques Chirac in the race to be the right-wing candidate for the 1995 presidential election, further increased Messier's prestige and influence. The return of the right to government saw the launch of a second wave of privatizations, this time of the Elf oil group, the BNP, and the Rhône-Poulenc chemicals group, then run by Jean-René Fourtou. Lazard's success owed much to Messier. "Edouard Balladur thinks...Edouard Balladur says" - Messier never missed an opportunity to flaunt his ties with the prime minister. Other partners in the investment bank found themselves abandoned by their clients. "You understand," they would be told, "he's close to Balladur." His success inspired jealousy among his peers, but the rainmakers adored him. Antoine Bernheim, the veteran investment banker and chairman of Generali, the Italian insurance group, said he considered his former Lazard Frères colleague "one of the most remarkable personalities of his generation...I very much regret that he did not choose to pursue his career at Lazard."

Copyright © 2003 Martine Orange. All rights reserved. This excerpt, or any parts thereof, may not be reproduced without permission.