Dealmakers in France breathed a collective sigh of relief on 24 April 2022, when Emmanuel Macron secured another term in office, fending off far-right rival Marine Le Pen with a margin of 17%. He is France’s first sitting president in 20 years to be re-elected.

The outcome is music to investors’ ears. Political uncertainty is rarely conducive to M&A and French deals in Q1 2022 were already down by 26% year-on-year to €23 billion. While this had as much to do with the war in Ukraine and ongoing inflation as the election, the latter was clearly a source of anxiety.

True to reform 

By and large, Macron has been good for France’s economy, fostering an investor-friendly environment. He signed an executive order in 2017 that streamlined the country’s knotty labour code, giving employers more power to negotiate pay with their workers and making it easier to lay off staff, which had been a sticking point for investors for decades.

In the same year, Macron’s pro-business budget saw him slash the country’s wealth tax and introduce a flat rate on capital gains. Private equity activity flourished under these conditions, with foreign capital taking a strong interest in deals.

A win by EU-sceptic Le Pen would almost certainly have reversed this progress, putting up barriers to cross-border investment.

French firms are not the only targets. In part because of Macron’s tax rules encouraging VC investment, the country’s start-ups are expansive and acquisitive. Last month, Vestiaire Collective, an online retail platform for second-hand clothing, bought US-based rival Tradesy for an undisclosed sum. Online marketplace solutions provider Mirakl, which raised €497 million in a Series E round last September, has been reaching out to potential M&A targets in Europe and the US.

Green is good 

The outlook for the country is relatively rosy, as investors continue to benefit from changes made during Macron’s first term. In addition, alongside Italian Prime Minister Mario Draghi, Macron supports a more measured approach to fiscal consolidation in the EU to prevent prematurely choking off growth and investment by excessively raising taxes and making deep spending cuts.

Other areas of opportunity include energy transition and decarbonisation. Related assets in the energy and digital technology sectors are likely to do well in the coming years amid an expected acceleration of environmental and sustainability reforms, which are at the heart of Macron’s vision for France.

Perhaps most important is that investors now know what to expect of the next five years from a political standpoint—more or less. That counts for a lot amid today’s macro volatility.

The big question is how long this can last. In 2017, when Macron first bested Le Pen, he did so with a margin of more than 32 percentage points. In the intervening five years, that lead has nearly halved. France’s next election may not yield the results that investors are hoping for.