City: French foray

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The Independent Online
IS Kingfisher, the Woolworth's, Comet and B&Q retailing group, going to be the exception that proves the rule, or is its ambitious move into the French electrical retailing market going to end in the way of most British business forays across the Channel - in tears? Last week, Barclays and National Westminster provided a timely reminder of just how difficult a market France can be for the British. Barclays was forced to write off nearly pounds 80m against its banking interests there. And NatWest is making provisions of well over pounds 100m to cover the cost of withdrawing from its French retail banking operation. With a few notable exceptions - Guinness/LVMH and GEC Alsthom being the two most visible - the French and the British mix about as badly in business as Pernod and beer. When they go acquisition-hunting or joint venturing in France, British companies tend to have little or no idea of what they are letting themselves in for. Most have a poor understanding of the culture, ways of doing business, labour practices, market and, in some cases, even the language. Ask anyone in business - outside those who follow the company closely - what they think of Kingfisher's pounds 560m acquisition of the Darty electrical retailing group and they'll give it to you straight: Kingfisher will rue the day it heard the name.

Sir Geoffrey Mulcahy, Kingfisher's workaholic chairman, is determined to prove them wrong. When I met him last week, he was as enthusiastic as ever about his new business, undeterred either by the collapse of the ERM or the damage the two clearing banks had received at the hands of their French subsidiaries. This time, it's going to be different, he insists. For a start, Darty is the undisputed market leader in France; too many British companies make the mistake of buying second best or worse, and as a consequence get squeezed. He has also been courting the company on and off for as long as six years, and therefore understands every aspect of its business; there could hardly have been a more thorough due diligence. The final part of his case is that the returns sought on the deal have been calculated on the assumption that Darty remains a stand-alone business; all the synergy benefits Sir Geoffrey hopes to extract from the alliance will be icing on the cake.

None of this will convince hardened sceptics. But they're going to have to get used to the idea; Sir Geoffrey is clear that before long, Kingfisher will be pursuing other overseas deals with Darty as the model - market-leading businesses in countries with above-average growth prospects. He's betting his future on the strategy working. Let's hope it does.

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