A Steel - Solid victory

It created the the Largest Steel company in the World. It is one of the most intensely fought Merger Acquisitions stories in the Steel Industry. And it will always be an inspiration to all Indian entrepreneurs with a Global twinkle in their eyes. The acquisition of Arcelor by Laxmi Niwas Mittal is no less than a thrilling story of a Conqueror's monumental victory. But after reading the story in detail as narrated by Paul Carson in his book " Cold Steel", one realizes that this victory was a combination of many individual wins:

1. A win of Business logic over Prejudices:

2. A Win of Intentions over Tactic

3. A Win of Maturity over Jingoism

A description follows:
A win of Business logic over Prejudices: When Mr Mittal made this bid, more than anything else, he was clear about one thing - "The deal is fully in the interest of the Steel Industry". Worldwide, The steel industry was in a dire need for consolidation, and Mittal knew this deal was a monumental step in that direction. This belief of Mr Mittal, firmly based on Business logic and a thorough understanding of the steel industry proved to be the strongest point of the Mittal campaign which followed. It was due to this belief which won negotiations after negotiations with the regulatory bodies for Mittal. It was due to this belief that, in an unprecendented manner, rallied Arcelor's investors towards Mittal side. It was due to this belief that the Media always spoke favourably of Mittal's campaign. All of them shared the belief, because all of them knew that the belief was an outcome of Sound business logic.

The Arcelor counter - campaign, on the other hand, just denied to even think for a second and assess whether the deal has any merit or not. Theirs was a knee jerk reaction right from the very beginning, especially from their CEo Guy Dolle. For him, it was always " A company of Indians" being preposterous enough even think of acquiring a European giant like Arcelor. This prejudice towards Mittal, which many at Arcelor shared, clouded Arcelor's reactions all thru. In the end, this proved to be the biggest factor why Arcelor lost support from all spheres, including their own shareholders.

A Win of Intentions over Tactic: Tactics, Manoeuvres, Brinksmanship - these have been parts of all high power deals till now. In this deal aslo, both parties made use of them; however it was the intention by which they were being used which decided their success and failure. While Mittal's moves had a positive intention of creating value and stregthening the Steel Industry, Arcelor's tactics were driven by a negative intention of "Blocking Mittal in whichever way possible". It was this difference in intention which resulted in a climax where more than 50% of Arcelor's shareholders forced the Arcelor board to consider Mittal over the "White Knight" which Arcelor had found in Alexey Mordashov of SeverStal, Russia. One of the last ditch tactis of the Arcelor board was this - It was proposed to allow Mordashov a 32% share in the company plus an option of Share buy back which would have givne him another 6 %. They knew that shareholders will not approves this, so rather than asking for approval on whether they should go ahead with Mordashov, they instead decided to go ahead with Mordashov and then ask the shareholders to express if they disapproved. To execute this calling of a "Negative vote", they called an Meeting of all shareholders and planned to ask them if they were in diagreement of the Mordashov deal. The shareholders were informed that Arcelor will go ahead with Mordashov until at least 50% shareholders be present at the meeting and vote in disagreement. Arcelor thought of this as a Winning move since historically, the average attendance itself at the these General meeting used to be never more than 35%. However, it was nothing but a win of intention over tactics which resulted in a turnour of an astounding 60% at the meeting with 57% voting against Mordashov; well actually voting FOR Mittal.

A Win of Maturity over Jingoism: The deal had a very strong nationalistic lement into it from the European angle. And it was understandable. Steel was a subject of national pride for the 6 European countries which constituted Arcelor - and especially for Luxembourg where Areclor was headquartered. It was said that - "steel flowed with blood for every citizen of Luxembourg". And that was because at one point in time not very far off in history, 70% of Luxembourg's organized labour worked for the Steel industry. In such context, a doze of nationalism was inevitable to get mixed in this "Business" Deal. Well, as a matter of fact, mixing always happens. Personal drives always get mixed with professional ones, emotions always get mixed with logical decision making, subjective biases always get mixed with Objective assessment. And more than these, nationalism gets mixed with business. However, isn't maturity all about knowing what gets mixed with what, and to what extent should this mixing happen? I believe maturity doesn't lie in denying this mixing, it lies in being aware of it and being in its control.

All stakeholders in this deal, other than Arcelor and to some extent the French Government, showed this maturity. Even the other 5 governments who were to legally approve or disapporove this deal. As an interesting aspect of the story, the Luxembourg government was already in the course of amending its takeover laws when this deal was announced by Mittal. Inordinate pressure was put on the Luxembourg government to do this amendment in such a way so as to thwart Mittal's bid. Completely short sighted in nature, these pressures were a perfect example of how NOT to mix nationalism in business; because when this kind of hapens, nationalsim turns into Jingoism. Had the Luxembourg government given in, it would have ended up painting a protectionist, anti - business image for the country which was striving to become one of the world's "most preferred investment destinations". Succumbing to these pressures would have been completely suicidal. Hats off to the Luxembourg government, it didn't give in to any of these protectionist overtures. The best part - It didn't unduly favour Mittal also in making the amendment. It just framed a policy based on rational thinking and business acumen - and given that these two were the cornerstones of the Mittal deal in the first place, there was no way in which the policy proved to be any impediment to Mittal. A mature decision making ultimately prevailed over Jingoism.

Acts of Rebellion: The common Explosive

History is fraught with Acts of rebellion of size small, big and enormous. The Mutiny of 1857 will certainly fall in the enormous category vis - a - vis acts like Industrial strikes which are quite "small" as compared to the Mutiny. However, any Act of rebellion - big or small is similar to an explosion. An explosion's impact is broadly governed by 3 factors:


1. The kind of Explosive used


2. The Amount of Explosive used


2. Spark(s) / Triggers to ignite the Explosive.





The "Nature of Explosive" in any Act of rebellion is a combination of factors internal to the persons involved - fears, prejudices, likes - dislikes etc. The number and cross section of people involved is what is equivalent to the "Amount of Explosive" . And the Trigger is a combination of all other external factors like situations, events, ideologies etc.





My recent experience at factories has made me an eyewitness to the phenomenon of Industrial Strike; and William Dalrymple's "The Last Mughal" showed the Mutiny of 1857 from the Indian side of the fence. Both these "Acts of Rebellion" are vastly different in terms of the magnitude and nature, and are, of course, separated by a time period of 150 years. And this is what made it more interesting for me to discover that the difference is mostly in terms of the "Triggers" which caused the explosion and the "Amount of Explosive" used. The "Kind of Exposive" behind the two acts was quite similar. This essay tries to explore this Explosive behind these Acts of Rebellion which, interestingly, is still well within its expiry date after more than 150 years of dramatic change.





If one explores the Reasons why the mutiny happened, the most cited reason is the cartridge of the P-53 Enfield rifle which was greased with Cow and Pig fat and had to be opened with mouth. On delving deeper, one also comes across more reasons like Bad working conditions, Less pay etc. But still, all these were triggers. Similarly, an Industrial strike has several evident reasons which are actually just the triggers to the explosion. The one thing which creates the explosive in the first place is An Attitude of Aloofness from the Superior's side. In the mutiny's case, it was the East India company Military adminstration who adapted the Aloof attitude, in a strikes' case it is the Factory management which does so.





This Aloofness - prima facie seeming to be just another behavioral parameter, is dangerous. Very dangerous. That is because almost always, it is perceived as Arrogance and a sign of "Looking Down Upon" by the party being shown aloofness towards. The impact this aloofness and its perception has is gradual - but very profound. This makes layers of Grudge in the hearts of the people who feel they have been looked down upon, and this Grudge is what exactly is the Explosive which has been mentioned above.





The aloofness has further hazards. Aloofness results in breakdown of communication between the two parties , which eventually creates an atmosphere of distrust. In such an atmosphere, all kinds of rumours, hereseys and half - truths start being perceived as The Truth. This enormously adds to the "Explosive of Grudge". It then becomes easy for prejudices to take precednce over logic, for impulsiveness to take precedence over maturity and for fanaticism to take precedence over reason - then be it a mutiny in 1857 or an Industrial Strike in 2009.



In the Mutiny's case, this phenomenon manifested as below:
Till about the 1820's, the "Angrez Sahib" mingled quite freely with the "Natives". In the personal sphere, they married to Indian women and proudly started an Anglo Indian Lineage. In the professional sphere, which mainly constituted of the Military and Administrative services, the Angrez Sahib, in spite of being the boss, showed camaraderie with his native subordinates. He talked to them in leisure time. He listened to their stories of "mofussil" - the Indian countryside. He showed interest in their language, culture and festivals. In short, and put in a layman's words " Angrez sahib hamare saath Uthte - baithate the."

By the 1850's, all this had changed. Having Natives "Bibis" had become a taboo. Mingling with the Natives was started to be perceived as "Unlike -Englishman behaviour". And taking part in the native festivals and "worshipping of strange deities" became "completely outrageous behaviour. " There were two main reasons behind this.

1. Heightened power of the East India company: By the 1850s, the East India company had reached its pinnace of imperial victories in and around the Indian sub continent. This conquer had steadily built a feeling of imperiaistic arrogance in the Englishmen
2. Advent of the Evangelicism: By this time, the Evangelical Christian missionaries had set their feet firmly in India thru an amended East India company charter passed in 1813 which allowed them to use the East India company's operations as platform for their work. Since the basis of their preaching was to "free the black man of his burdens", it inevitably created a drastic change in the way "Angrez sahib" saw the "Natives."

Thus, by 1857, " Angrez sahib ab hamare sath uthate baithate nahi hain" had become an all pervasive feeling. Aloofness and the susequent layers of Grudge had firmly grounded themselves in the hearts of the Natives, including, of course, the Sepoys of the East India company. The explosive was ready. And that too, in huge quantity since the grudge was prevalent in almost all Natives even remotely associated with the East India company.

And then the sparks came. Low pay, bad service conditions, rumours of forced religious conversions within the Sepoy ranks and Finally - the Enfield rifle cartridge and Mangal Pandey. Sufficient to cause a massive explosion.

And massive explosion it was. The Mutiny of 1857 was the largest Armed rebellion in the History of British Empire, not just in India, but world wide. Varying in nature and magnitude according to geographies, political conditions, local interests and religious flavours, the Mutiny took one form after the another, progressively getting more and more gruesome. Like a kid rubbing and rewriting on a slate, it changed destiny of Indian rulers and Kingdoms - including the 500 Yrs old Mughal Empire. But the most significant impact if the Mutiny was even more holistic - It canged the very lens thru which the British and the Indians saw each other. This lens which had contempt before the Mutiny, now was filled with Antipathy and Hatred created by the atrocities and inhuman acts committed by both sides during the mutiny.

Although the East India company was dissolved in 1858, this lens stayed. It played a very significant role thereafter since it defined the very way in which the British conducted themselves in Colonial India post 1857. It built the foundation of all the political, administrative and judicial systems which the British Raj laid down in India after 1857. The Britishers left in August of 1947 and an Independent India was born, but as we all know, most of our administrative, political and judicial systems remain unchanged - still a legacy of the British Raj. So, in short, the "Lens" has forever become a cornerstone of the foundation of India.

Such was the imapct of the Mutiny of 1857 - triggered by various events, compounded by the number of stakeholders involved, BUT created by one seemingly harmless vice - Aloofness.

The unrest in Industrial scenarios follows the same pattern. The evident reasons, triggers and magnitude varies, but all can be averted if the factor which builds the explosive - the seemingly innocuous but highly dangerous trait of Aloofness can be taken out of the management behaviour. In short, for Good Industrial relations, nothing much needs to be done except - "Saath Uthna Baithana chahiye."