Vivendi Case Analysis
Vivendi
Case Write-up
What is Vivendi’s corporate vision? How does this firm intend to create value?
Vivendi entered the market as CGE, a water utility company with some activities in waste management under Guy Dejouany. Under him, the company grew rapidly expanding in a wide variety of businesses such as real estate, transport, healthcare and telecommunications. Dejouany’s management style focused on taking advantage of the 1980s which were a period of “unprecedented opportunity”. Management believed that the lack of venture capital and the weak capital market in France placed the cash-generating CGE in a unique position to take advantage of the changes. The Company was run in “Colbertist” management style founded on a nationalist economic doctrine run by a central power. CGE generated value from diversification and expansion of cross shareholdings. The success of diversification for CGE was characterized by spontaneous growth where Dejouany trusted the entrepreneurial spirit of a group of individuals and their judgment of the market. Dejouany’s management style was also based on instinct and opportunity, sometimes acquiring institutions from personal experience. Investing in those ventures lacked a formal asset allocation system and the compensation system at the company was strictly based on salary. Bonuses for top managers were also based on management discretion. Despite the success of Guy’s corporate vision and business ventures, it was the cash flow from the core utilities businesses which made the diversification financially feasible. During the cash crisis of 1992, the corruption scandal in 1995 and the inherent problems of the French capital markets, the stock of the highly leveraged CGE underperformed the CAC40, falling close to 30 percent in 1994. Jean-Marie Messier became the new Chairman and CEO of CGE in November 1995 and promised to take the Company in a different direction. Messier’s vision was to simplify CGE and return the company to
Case Write-up
What is Vivendi’s corporate vision? How does this firm intend to create value?
Vivendi entered the market as CGE, a water utility company with some activities in waste management under Guy Dejouany. Under him, the company grew rapidly expanding in a wide variety of businesses such as real estate, transport, healthcare and telecommunications. Dejouany’s management style focused on taking advantage of the 1980s which were a period of “unprecedented opportunity”. Management believed that the lack of venture capital and the weak capital market in France placed the cash-generating CGE in a unique position to take advantage of the changes. The Company was run in “Colbertist” management style founded on a nationalist economic doctrine run by a central power. CGE generated value from diversification and expansion of cross shareholdings. The success of diversification for CGE was characterized by spontaneous growth where Dejouany trusted the entrepreneurial spirit of a group of individuals and their judgment of the market. Dejouany’s management style was also based on instinct and opportunity, sometimes acquiring institutions from personal experience. Investing in those ventures lacked a formal asset allocation system and the compensation system at the company was strictly based on salary. Bonuses for top managers were also based on management discretion. Despite the success of Guy’s corporate vision and business ventures, it was the cash flow from the core utilities businesses which made the diversification financially feasible. During the cash crisis of 1992, the corruption scandal in 1995 and the inherent problems of the French capital markets, the stock of the highly leveraged CGE underperformed the CAC40, falling close to 30 percent in 1994. Jean-Marie Messier became the new Chairman and CEO of CGE in November 1995 and promised to take the Company in a different direction. Messier’s vision was to simplify CGE and return the company to