ENGIE: Strategic Transformation of an Energy Conglomerate

In 2016, the €75 billion French multinational energy conglomerate ENGIE was massively transforming its strategic and operational imperatives toward renewable energy. The 200-year old company owned Europe’s biggest natural gas pipeline and was a major global producer and supplier of natural gas and other energy sources. ENGIE had announced the transformation in 2014—following a sharp drop in global fossil fuel prices—viewing it as the beginning of a new era in energy. ENGIE set goals to double renewable power capacity for Europe over the next decade, rapidly expand its renewable footprint in high growth regions such as India and China, slash its lines of businesses based on commodities, and reduce exploration of oil and gas. CEO Isabelle Kocher’s vision followed her belief that “the name of the game was to take the lead in the new energy world.”

The case is set in mid-2015, when top management, convinced that ENGIE needed to build a strong global portfolio quickly, acquired nine-year old French energy company Solairedirect for €200 million. The acquisition made ENGIE the number one solar company in France and gave it an international presence and product pipeline. Solairedirect had a profitable business model—different from ENGIE’s—that enabled it to rapidly build utility scale solar photovoltaic installations at competitive prices. ENGIE believed that buying the smaller company would bring an entrepreneurial spirit and new way of thinking to the company. However, ENGIE had just reorganized along mostly geographical business units, and Solairedirect did not fit into that organizational structure. Also, when ENGIE acquired Solairedirect, the solar company had just experienced an unsuccessful IPO attempt. The questions arose as to whether a company in that situation was a good acquisition target; whether ENGIE paid the right price for it; and how, and to what extent, Solairedirect could or should be integrated into the larger organization.