In a recent report, former ECB President Mario Draghi highlighted that the EU has failed to create any companies with a market cap over €100 billion in the last 50 years. In contrast, multiple US firms exceeding this threshold emerged post-1974. Draghi’s observation underscores the EU’s struggle with innovation and a static corporate landscape. While examples like ASML exist, many prominent European companies originated from mergers and acquisitions. Draghi suggests Europe has potential in generative AI despite its innovation challenges.
(BFM Bourse) – In a recent report on the competitiveness of Europe, former European Central Bank President Mario Draghi pointed out that the European Union has not produced a single company with a market value exceeding €100 billion in the past 50 years. While this statement is notable, it warrants further examination.
This observation emerged as one of the key takeaways from Mario Draghi’s report last month, where he highlighted that over the last half-century, the EU has struggled to create any company with a market capitalization exceeding €100 billion.
In sharp contrast, every one of the six US firms valued at over €1,000 billion is less than half a century old, according to his analysis.
‘For Mario Draghi, this underscores a fundamental issue facing Europe: there is a lack of innovation coupled with a stagnant corporate environment that hinders potential avenues for growth,’ emphasized Jim Reid from Deutsche Bank in a recent analysis.
Is this assessment accurate? The short answer is yes, provided one interprets Mario Draghi’s statement straightforwardly.
It is indeed true that all US firms surpassing €1,000 billion in market valuation were established after 1974. While companies like Microsoft (1975) and Apple (1976) just made the cut, Berkshire Hathaway—whose origins trace back to the 19th century—only recently exceeded $1,000 billion in valuation, though it remains below that threshold in euros.
ASML: A Different Story
When it comes to the European landscape, Draghi’s comments should be approached with careful scrutiny. He specifically stated that ‘there is no company in the EU with a market capitalization exceeding €100 billion that has been created from scratch over the past fifty years.’
The term ‘from scratch’ refers to organizations established as new entities, rather than those formed through mergers, acquisitions, or corporate splits.
This distinction is crucial. As noted by Jim Reid, ASML, a Dutch firm specializing in photolithography—a vital technology for the semiconductor sector—was founded in 1984. With a market valuation of €265 billion, ASML ranks as the third-largest company in Europe. However, it’s worth noting that ASML was established through a joint venture between electronics giant Philips and semiconductor group ASMI (Advanced Semiconductor Materials International).
The first European publicly listed company, the Danish firm Novo Nordisk, dates back to the 1920s. LVMH, the second-largest listed company in Europe, emerged in 1987 through a merger between the historic brands Louis Vuitton and Moët Hennessy, whose lineages extend back to the 18th and 19th centuries, respectively.
According to Jim Reid, the company that comes closest to challenging Draghi’s assertion is the German software company SAP, which has a market cap of €240 billion and remains the largest on the Frankfurt Stock Exchange. However, SAP was founded two years too early, in 1972, to contradict Draghi’s claim.
Can Spotify Change the Landscape?
On a promising note, Swedish streaming platform Spotify was established in 2006. Although it has yet to reach the €100 billion mark—with a current market valuation of $76.2 billion (approximately €70 billion)—the company is showing significant growth. Spotify’s stock has surged by 101.5% this year and 152% over the past 12 months, indicating that the €100 billion milestone might not be out of reach in the coming years.
Mario Draghi’s comments serve not only as a stock market critique but also highlight the underlying issues in Europe’s capacity for innovation and the emergence of new major companies in rapidly evolving sectors.
He pointed out that innovative digital firms often struggle to gain traction and attract funding in Europe, resulting in a significant disparity in late-stage financing compared to the US. For example, Draghi warns that Europe risks falling further behind in cloud computing.
Nevertheless, he remains optimistic about Europe’s potential in generative artificial intelligence, largely due to its strong foothold in robotics.
Additionally, the companies listed on the CAC 40 index are relatively established. An Amafi report from 2015 revealed that the average age of companies on the Paris index was around 100 years. Currently, while Edenred became independent in 2010, it had been a subsidiary of Accor since 1983, indicating its origin dates back to the creation of Ticket Restaurant in 1962.
Similarly, STMicroelectronics was founded in 1987 through the merger of SGS Microelettronica and non-military segments of Thomson semiconductors. The laboratory Eurofins also