Restructuring / Turnaround Strategies Case Study

Case Title:

Italy's Electricity Giant, Enel: Paolo Scaroni's Turnaround Strategies

Abstract:
Enel, Italy's state-owned power utility, was the world's second largest electric company in terms of installed capacity and number of consumers. It monopolised the Italian electricity markets until the deregulation of Italy's power sector in the 1990s. Franco Tato, the then Chief Executive Officer (CEO) of Enel, envisaged a multi-utility company with diversified interests. With this vision, he acquired businesses in gas, water, real estate, waste treatment and telecom sectors, none of which were related to Enel's core business of power generation and distribution. Franco Tato failed to extract synergies from the company's varied businesses. The results were falling share prices, and declining profit margins for Enel, and rising cost of electricity for consumers in Italy. Paolo Scaroni, architect of the turnaround at loss making British glassmaker, Pilkington PLC., was appointed the CEO of Enel in 2002. Under Scaroni's leadership, Enel executed an about-turn from Tato's multi-utility strategy, divesting all non-core activities, and concentrating on electricity and gas.

Pedagogical Objectives:

• To discuss the diversification strategies employed by Enel under Franco Tato and their effects
• To discuss the turnaround strategies employed by Paolo Scaroni for the company’s profitability and to redefine its strategic focus.

Keywords :  Ente Nazionale per l’Energia Ellettrica (Enel); Electricity generation and distribution; Monopoly and state owned company; Turnaround strategies; Restructuring plan; Franco Tato and Fulvio Conti; Unrelated diversifications and expansions; Paolo Scaroni; Electricity, water, gas, telecommunications; Lost business focus and poor decisions; Troubled times and leadership change; Mergers and acquisitions; Restructuring / Turnaround Strategies Case Study; Liberalisation and deregulation; Turnaround specialist; Divestments and spin-offs