Leadership in M&A | In Practise

Leadership in M&A

Principal at Nexant and Former Global Head of Specialty Gases & Equipment at Linde

Learning outcomes

  • What is the difference between typical change management processes and merger situations?
  • What tools and principles can leaders turn to when navigating a period of heightened uncertainty as is typical in mergers?
  • What are the psychological dispositions that can help leaders thrive in a merger situation?
  • What does effective leadership communication strategy look like in a merger?
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Executive Bio

Stephen Harrison

Principal at Nexant and Former Global Head of Specialty Gases & Equipment at Linde

Steve’s career the Industrial Gases business has spanned over 27 years working for The BOC Group (a FTSE 100 company) and Linde (a DAX30 organisation). He was active in all major business areas: tonnage pipeline supply, bulk process gases and packaged cylinder gases. Over that time, he spent 15 years in global strategic leadership roles and was heavily involved in acquiring and integrating business from Air Products, Airgas, AGA, Gaspro, Matheson, Praxair and Spectra Gases. More recently, he has been running his own consulting practice at sbh4 and is the principal, Germany, at Nexant Energy & Chemicals Advisory – responsible for consulting activities in the DACH region. Read more

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Could we talk about excellence in leadership and how you might define that?

I think that we can sometimes talk about an entrepreneurial manager and a leader, various different types of role that people can play at a senior level in an organization. I would sometimes differentiate managers or managements as: Managers manage things or processes and Leaders lead people. So we have a difference between processes/things and people. What does that really mean? It means that leaders have to engage with people at an emotional level, not simply at a functional or a disciplinary level. Leaders need to inspire, influence and ultimately motivate other people to do what they want them to do. Motivate rather than manipulate! That for me is really what leadership is all about. Hopefully leadership is taken in a positive direction and that influence and motivation is done in a constructive way to create ‘Good’. Whether that’s value, shareholder value etc.

Clearly there have been tremendously catastrophic examples throughout history of very powerful and extremely successful ‘leaders’ who have led their people in destructive directions, wars have started for reasons such as that. The power of leadership can also be used to take people in a tremendously destructive and ‘bad’ direction. I think that leadership really is about taking people somewhere different and if it’s used well, taking them somewhere better.

What role does emotional intelligence play in that story?

I think emotional quotient/emotional intelligence and social quotient/social intelligence are both extremely important attributes in a successful leader in a modern environment. That being said, the different type of leadership skills that may need to be played out exhibited, manifested at a particular time, or in a particular organizational culture, will need to be very different.

If we have a manager with extremely good emotional intelligence/social intelligence working in a very disciplinary, functional, numbers oriented, process-oriented environment then we have the most terrible cultural mis-match. Both the organization is going to find this person rather strange and the person is going to find the organization rather frustrating. Similarly, if we’re at war, literally at war, yes clearly soldiers and military leaders sometimes need to display incredible emotional intelligence to the people around them in the most frightening situations but at certain other times they need to present authority. Very simple leadership is sometimes about authority.

Those are some polar extremes there but in certain business situations there comes a point where we need to say “I’m very sorry, but this is the way it’s going to be.” To associate leadership with authority is perhaps a very strong historical link, but sometimes it’s still relevant. The emotional intelligence and social intelligence are very critical in modern business environments, especially in smaller companies that are operating outside of a traditional corporate setup. However, if you’re walking into a traditional corporate setup, perhaps an organization with a strong Japanese type culture or something like that, then you might find other functional, technical attributes significantly more important in your leadership style than emotional intelligence.

A holistic approach?

I think an approach that fits the requirements, if you’re willing to adapt and if you’re style is clearly very different to the culture in which you’re operating then you either make a quick decision as to whether you can influence the culture more in the direction that you feel comfortable or whether you need to influence your life in a different direction with a different company where you’ll feel more at home.

Could you say a few quick words on the logic of Mergers and Acquisitions in Industrial Gasses and the appeal of deal-making within this industry?

Scale really matters. Operational density and intensity really matters within power zones, these are the drivers of profitability. As the industry has consolidated in the past prices have tended to move up, EBIT margins have tended to move up, so the industrial logic for consolidation in the sector has been very similar to any other businesses such as those operating in the Pharmaceuticals or Chemical sectors.

The deals have been fundamentally around scale, not so much technology. In the world of High-tech, sometimes people make acquisitions to bolt on bits of technology into their organization. That’s not so much been the driver, it’s more about driving efficiency, scale, profitability, in terms of price and cost.

Scale matters, density matters, these are the main drivers of profitability. Understanding that means that you’re 90% of the way there to being a good leader and a good executive in the sector.

Could you take us through your experience in acquiring businesses and the leadership demands that were placed on you?

When we think about what I said earlier about M&A being very much a classical and typical change management process, the leadership skills required to operate effectively in an M&A situation are pretty much the same as we would need in any significant change situation. Frankly speaking that we would need to lead our teams daily, whatever is going on. We are always faced with change, evolving our business, the environment around us is evolving also. During a major M&A situation it’s simply more intense. We’re working at a faster pace, people’s emotional stimulation is more intense, the stakes are higher and it means more in terms of the risks.

We might have just paid a lot of money for a company; we need to get it right and don’t want to lose the value that we’ve put in. People’s lives and jobs are at stake, they might need to relocate or switch roles. The consequences of change can go beyond the professional and into the personal. The level of intensity is quite extreme, but the principals are no different to being a leader in daily business or any other change situation. What’s absolutely critical in my opinion, in terms of leadership in this intense environment or in fact in a daily situation, are some of the social and emotional empathetic people skills that we demonstrate through our leadership. How we manage people’s hope, their motivation, sense of purpose and how we communicate with people with empathy. Communication is not just talking to them or at them, but listening to them.

Communication is very much a two-way process; it involves the words we use and the emotions we express and acknowledge in others. These for me are the absolute core fundamentals of leaders and are some of the things that differentiate functional managers who might be extremely good at what they do technically from leaders who while they are good technically and functionally also recognize that it’s the people around them who are going to make the difference between success and failure in the M&A situation, or to be honest in any major change situation.

Could you describe to us the experience the BOC/Linde deal. With emphasis on the experience of being acquired?

Here are two very large organizations that are coming together, each with multi-billion-dollar turnover. The year is 2007, so more than ten years ago. Both of the companies having global operations and a mixture of local businesses and global teams. In any one particular country you might have had a Linde and a BOC team coming together in that particular country. Effectively the whole deal can be looked at as the combination of 10-14 different country businesses, so 10-14 different acquisitions to bind together and integrate. In addition to that both organizations had a global or a super-regional team, for example an EMEA team or a North America team. You have regional teams to bind together as well as global teams to bind together. Whether that be functional teams such as HR or Finance operating at a global level or global business management teams.

Global, Regional and Local, three layers in the hierarchy of integration to take place. That made it a very complex integration process. The stakes were pretty high, both were public listed companies with very successful track records, expectations from the financial community were high, synergy promises, cost commitments, revenue commitments had all been made and were expected to be delivered. People’s reputations as CEO or senior business leaders were at stake in making sure that they were delivered.

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