The method was simple: 'Pure financial technique'
When talking about his beginnings, Borloo emphasises his degree in philosophy and history, as well as his legal studies. His official biography also happily recalls his trip to China at the start of the 1970s when he succeeded in meeting with Mao Zedong. On his return to France, Borloo, who had also studied at the top business school HEC (L'École des hautes études commerciales), opted for a career in commercial law. He joined the law practice of Philippe Saigne, who would later become, and remains, his law partner.
In 1978 he was given his first major case, saving a building firm that had built more than 4,000 houses known as 'chalandonettes' after a former housing minister Albin Chalandon. This was one of the great housing scandals of the 1970s in which thousands of families had been encouraged to become homeowners by buying houses that were hastily built and which were subsequently found to be full of defects.
Jean-Louis Borloo very quickly began to specialize in bankruptcy law. As a result of the second petrol crisis thousands of businesses, and even some business empires, were collapsing. The young lawyer had a key advantage over his colleagues; he knew all the financial practices, he could read a balance sheet and he understood the possibilities that the 1967 bankruptcy law offered as long as one did not adopt too legalistic an approach to it. Indeed, the 19th-century French writer Honoré de Balzac wrote long ago about the fortunes to be made amidst the rubble of collapsed businesses. Borloo very quickly became one of the lawyers of choice for those using the commercial courts.
However, the real turning point for Borloo came in 1982 when he led the legal dossier to save Terraillon, a well-known firm making weighing machines in the Haute-Savoie, from closing. The firm interested SDBO (Société de la banque occidentale - one of the affiliate banks of the Crédit Lyonnais) and more particularly its director, Pierre Despessailles, Bernard Tapie's mentor since 1977.
Click here to see INA archive footage of Bernard Tapie and Jean-Louis Borloo together during a conference at the French Higher Business School, in 1983 (and pictured below).
Borloo hit it off with Tapie, who had already gained a certain notoriety after his takeover of a firm called Manufrance in 1980. Borloo did all he could to help Tapie acquire Terraillon. Tapie abandoned his long-time lawyer Claude Colombani for Borloo with who he worked over the following ten years, becoming models of what was called the 'new spirit of enterprise'.
However, the Terraillon case meant more for Borloo than just linking up with Tapie. He became the contact point with the SBDO bank, and became part of the Crédit Lyonnais system. This was a secretive system, with SBDO boss Pierre Despessailles at the centre of it. He was so powerful that even Jean Deflassieux, president of Crédit Lyonnais between 1981 and 1986, could not get rid of him, despite numerous attempts.
Pierre Despessailles is also the author of a book that became a reference work on the subject of banks and bankruptcy. In 1977 he became a judge, and from 1981 he was president of the first chamber of the commercial court of Paris. That is where all the economically important cases were heard. Because of his position, Despessailles had first knowledge of the court cases and would see which ones could threaten his bank, would spot the most interesting ones and knew which levers to pull to help support a likely candidate for a takeover.
The arrival of Jean-Louis Borloo on the scene completed the picture. The lawyer was surrounded by accountants and tax experts able to dissect the files. When they arrived for a hearing everything was already in place. The method was simple. First of all they had to be sure that the company concerned still had valuable assets. Then a takeover bid was put together for a symbolic one franc - it was rarely more - and creditors were asked to give up all or part of their claim. Then new money was put up, either in the shape of increasing the capital to get rid of remaining shareholders (who could become troublesome) or as a form of bank credit to pay off any remaining debt. The sale of the assets was used to pay off the loans, there would follow a series of restructuring plans and the company would finally be sold with the owner and his associates pocketing the difference. "The technique is always the same for everyone, it's pure financial technique," Jean-Louis Borloo later commented.