Thomas Cook, or the sudden death of big business

Through the setbacks of the British tourism giant, the professor of management sciences Armand Hatchuel explains, in his column, that the rules of auditing and financial audit seem ill-adapted to the complexity of modernization investments of large companies.

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"The trajectory (of the tour operator) illustrates a more general strategic dilemma between external growth, which aims at a dominant position in the sector, and growth through innovation that renews the profession" (Palma de Mallorca, 25 September). DPA / Photononstop

Chronicle "Companies". A month ago, Thomas Cook, one of the oldest English companies, a giant of tourism, went bankrupt. Nearly 600,000 holidaymakers of all nationalities found themselves without means of return around the world, imposing emergency repatriation at taxpayers' expense.

As for the thousands of agents and hotels that had trusted Thomas Cook, they saw their debts compromised. Bankruptcies are common, but the sudden death of one of the most established tourist chains is disturbing! Many have seen the invisible hand of "creative destruction" peculiar to the economies of rupture. But these explanations were not enough in the English Parliament, a commission of inquiry has assembled and published, in record time, a mass of testimony and documents on the case.

These data reveal a forward run begun in 2007, with a series of mergers and acquisitions that would give Thomas Cook a global critical size, albeit at the cost of massive debt. But the expected benefits are not there and, in 2011, Thomas Cook is bloodless and thank his leader.

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The next team is working to recapitalize the company, abandoning subsidiaries and engaging in digital transformation. But this forced march goes wrong and in 2015, the current direction replaces it. It is developing partnerships with Web players like Expedia, but financial asphyxiation is still a threat.

Strategic dilemma

In 2018, the heat wave and the effects of Brexit lead the English parent company, and impose several attempts to recapitalize, especially with the entry of Chinese Fosun. But several hedge funds are betting on the bankruptcy of Thomas Cook. Forced, the leaders seek in vain the help of the English government. Liquidation is necessary.

Thus the trajectory of Thomas Cook does not reflect a constant blindness to the digital mutation of tourism. It illustrates a broader strategic dilemma between external growth, which aims to dominate the sector, and growth through innovation that renews the business.

Recent work (Laure-Anne Parpaleix, "Private Equity can Sustain Sustainably Business Growth Study, Model and Conditions of Capital-Regeneration", Thesis PSL / Mines ParisTech 2019) show that drive one without the other can condemn the company to a desperate oscillation, under stress of indebtedness, between the two strategies.


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