US Capitalization Gradually Overpowers Europe's Corporate Dominance
In the ever-evolving landscape of global business, the balance between economic integration and national sovereignty has become a pressing issue, particularly in Europe. This article explores the current state of ownership in European businesses, the challenges posed by external investments, and potential solutions to safeguard economic autonomy.
One model gaining traction is the Employee Stock Ownership Plan (ESOP), which allows employees from all ranks to participate in ownership. This localised approach has shown promise, with studies indicating that businesses adopting this model tend to outperform conventional competitors and demonstrate improved crisis resilience.
However, transfers in business ownership are accelerating across Europe, with approximately 600,000 businesses changing hands every year. Among these transfers, US investments in European companies have reinforced deep economic integration between the two regions. By 2022, US foreign direct investment (FDI) in Europe amounted to over €3.7 trillion, and the mutual investment stock between the US and EU is estimated to reach $7.4 trillion by 2025.
This extensive interdependence, however, complicates Europe's ability to maintain independent economic policy and ownership control, especially amid political tensions and trade disputes. Effects on European companies include enhanced cross-border trade and supply chain integration, increasing vulnerability to US policy shifts, exposure to US political and economic risks, and potential dominance or influence by US investors in key European industries.
To protect economic sovereignty, potential solutions through ownership models include promoting European ownership and strategic investments, public-private partnerships and sovereign wealth funds, regulatory measures on foreign investment, balancing foreign investment with strategic autonomy goals, encouraging intra-European investment and cooperation, and establishing employee buyouts.
These approaches aim to strike a balance between the economic benefits of transatlantic investments and the need for Europe to retain control over its critical economic assets and strategic industries amidst geopolitical uncertainty. The European Commission has emphasized "strategic autonomy" as one of its top industrial policy priorities, but it remains unclear what concrete and systemic measures it is proposing to prevent the acquisition of European businesses by global investors.
As the window of opportunity for effective defence may be narrowing, a decisive industrial policy that puts a figurative "not for sale" sign in front of Europe's businesses could help protect European economic autonomy from the "whims" of global capital. This could involve special legislation to provide regulatory certainty for sellers and sustainable models that anchor ownership securely, such as employee buyouts facilitated through perpetual trusts.
A robust financial infrastructure with a range of financing instruments is essential to support leveraged buyouts and decrease risk for private lenders. In Germany alone, over 600,000 businesses are planning a business transfer in the next two years. Fiscal incentives that favour employee buyouts over financial buyouts play a crucial role in facilitating transitions.
In conclusion, the defence against financial expansionism lies in the proactive establishment of ownership structures that embed businesses within their communities. By promoting local ownership, strategic investments, and employee buyouts, Europe can safeguard its economic sovereignty and ensure its industries remain under the control of those who contribute to their success.
- In light of the extensive interdependence between the US and Europe, particularly in the realm of business ownership and transatlantic investments, it is crucial for Europe to establish a proactive industrial policy that protects its economic autonomy from global capital.
- The European Commission's emphasis on strategic autonomy highlights the need for concrete and systemic measures to prevent the acquisition of European businesses by global investors, such as promoting local ownership, strategic investments, and employee buyouts, which could be facilitated by perpetual trusts and adequate fiscal incentives.
