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FEBRUARY 1, 2005
By Carol Matlack The Rise of "Small Multinationals" Increasingly, European high-tech concerns aren't waiting to hit the big leagues before acquiring foreign outfits, especially of U.S. ones
In a week dominated by megamergers such as SBC-AT&T (SBC , T ) and Procter & Gamble-Gillette (PG , G ), the Feb. 1 acquisition of Silicon Valley software company V Communications is easy to overlook. After all, V Communications is only an $8 million-a-year business. The acquiring enterprise, Paris-based BVRP Software, is no heavyweight, either, with only $74 million in annual sales. But the deal exemplifies a trend worth watching: The emergence of what BVRP Chief Executive Bruno Van Ryb calls "small multinationals," companies that begin hunting for foreign acquisitions when they're still very small. GROWING RANKS. For high-tech businesses -- especially those based in Europe -- a U.S. acquisition can be the key to survival, Van Ryb says. "An innovative software company cannot become a global player without being strong in the U.S. market," he notes. "It puts you in a situation to understand the market and have relationships with suppliers." Indeed, V Communications is BVRP's second U.S. acquisition. Three years ago, it acquired Silicon Valley software publisher, Elibrium. V Communications, which develops software tools for managing and protecting data on PCs, is a good fit for BVRP's other business lines, which include software for business accounting and wireless applications, Van Ryb says. With the acquisition, BVRP will reorganize its corporate structure, with V Communications founder and President Frank van Gilluwe joining the French company's executive committee and heading a newly created utility-software division. "We're now organized like a big group, but still lean and mean," Van Ryb says. Certainly, the ranks of small multinationals are still thin. But they're growing. ILOG (ILOG ), a $100 million-a-year French software and services concern, has made several U.S. acquisitions and now maintains dual headquarters in Paris and Silicon Valley. Eurofins, a biotechnology-testing outfit based in the French city of Nantes, has acquired several U.S. laboratories as part of a rapid global expansion. For inspiration, these companies can look to Business Objects (BOBJ ), a software maker that was founded in France but has gradually shifted its corporate center of gravity to the U.S., growing into a $600 million-a-year business. CURRENCY HIT. Given the U.S. dollar's recent weakness against the euro and other foreign currencies, could a wave of other deals be in the offing? Probably not. Even if the purchase price is more attractive, it could easily be offset if the acquired company books most or all of its sales in dollars. With the V Communications deal, for example, BVRP will now book about half its revenues in dollars. Nonetheless, it's an intriguing cross-border trend to watch as the software industry continues to consolidate.  Matlack is a correspondent in BusinessWeek's Paris bureau
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