Too singular to go Dutch: The downfall of Reed Elsevier's British co-chairman last week was perhaps inevitable given the clash between corporate cultures. William Kay reports

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The Independent Online
THE dramatic departure of Peter Davis as co-chairman of Reed Elsevier, the Anglo- Dutch publishing group, was portrayed last week as the defeat of a headstrong British chief executive by an inflexible phalanx of Dutch partners determined to impose a continental European style of rule by committee.

The resignation of Mr Davis is likely to be cushioned by a pay-off in the region of pounds 700,000. But it draws an ugly gash across what has, so far, been a publicly trouble-free merger to produce a group that stretches from Woman's Own to the Journal of Financial Economics, with local newspapers in Britain and continental Europe.

The task of blending the more flamboyant British management style with the sterner Dutch approach was always likely to have its share of hiccups. But as the dust settled, it became clear that a crucial extra factor had come into play in recent months: the ambition of Ian Irvine, former chairman of the now-defunct TV-am and one-time chairman of Fleet Holdings - the Daily Express and Sunday Express group - which is now part of United Newspapers.

'The Dutch acted as a block,' said one insider, 'and most of the British directors supported Davis. But the role of Irvine is cloudier.'

When it came to the vital vote of the executive committee at 4.30am on Saturday, 25 June, Mr Davis was outgunned by four to one. In the end, Nigel Stapleton, the finance director who spent 18 years at the Anglo-Dutch company, Unilever, became resigned to the inevitable and lined up with Mr Irvine and the two Dutchmen, Pierre Vinken and Loek van Vollenhoven.

Mr Irvine becomes co- chairman with Mr Vinken, a brain surgeon-turned-newspaper publisher, who once said: 'I don't speak to newspapers voluntarily.' Mr Stapleton steps up to deputy chairman. When Mr Vinken retires he will be replaced by Herman Bruggink, currently in charge of the group's legal and medical publishing, which includes the Lancet and Halsbury's Laws of England.

But until a year ago, when Mr Davis and the Dutch began to drift apart, Mr Irvine, at 57 five years older than Mr Davis, faced the prospect of seeing out his time as chief executive of Reed International Books and chairman of Capital Radio. Now the man who in the early 1980s was pipped to the senior partnership of accountants Touche Ross moves to the joint top position at Reed Elsevier, one of the world's biggest publishers. It is a crowning glory that must at one stage have seemed as if it would never happen.

Asked if Mr Irvine's actions over Mr Davis could have been prompted by personal considerations, one well-placed source replied: 'You might say that, but I couldn't possibly comment,' taking the famous line from Michael Dobbs's political TV series, House of Cards.

One of the City's leading media analysts explained: 'I don't think it was necessarily an Anglo-Dutch clash of styles. Davis was unhappy in an environment of management by committee. The role he liked was very much a hands-on chief executive. But Irvine is also a happier man now. He had been unhappy with the way things were going, and his role in the management structure. He was not having as much bearing on strategy as he might have liked, and now new horizons open up for him.'

Mr Irvine has refused to discuss the matter until after he announces the group's interim results on 11 August. But analysts were pointing to the phrase he repeated several times on the day Mr Davis resigned: that it was vital 'that everyone is using the same hymn sheet and all singing the same songs'. This has been seen as an attempt to stifle unflattering versions of what went on.

However, Lord Matthews, Mr Irvine's former boss at Express Newspapers and Reuters Holdings, said from his home in Jersey: 'He's fallen on his feet, hasn't he? He's a quiet accountant, really, but he struck me as a Machiavellian type who was quite clever at manipulating people. I had to scratch my head when I read that he was getting the credit for taking Reuters public' - a coup Lord Matthews claims for himself.

It will be some time before Mr Irvine's role in the affair can finally be gauged, but the extent of the pressures were revealed by Mr Davis in an extensive interview.

He said: 'It isn't surprising that in trying to put two successful companies together on a 50- 50 basis you don't expect everything to go entirely smoothly. Inevitably, moving - in the case of Elsevier - from a smaller company to a very much bigger group causes some change and some pressure. In the case of Reed, moving from a classic Anglo-Saxon chairmanship to the Continental executive committee style is requiring a change of gears, and that's taking a little longer. It isn't surprising that it produced one or two lively debates.'

Mr Davis pointed out that Reed had made more than a hundred acquisitions in the publishing world and was used to putting systems in and getting on with it. Similarly, Elsevier had made a number of successful acquisitions and had its own methods.

He was spending a minimum of a day every two weeks in Holland. The routine meeting of the executive committee alternates between the two countries, but full board meetings are mostly held in London, because the the group has more companies in the UK than in Holland.

Mr Davis added: 'I think a company needs a clear focus and clear leadership, and I'm used to that being provided in any of the companies that I've been involved with in an Anglo- Saxon environment. In American companies and British companies that means a classic, hierarchical chairman and/or chief executive mode.'

But from the start it was widely accepted in Reed's comfortable head office, off Curzon Street in London's exclusive Mayfair, that Elsevier was a high-risk partner.

For three years, the Dutch group had danced an on-off engagement with Pearson, the group that owns Penguin Books and the Financial Times. In 1988, the two sides had taken shares in one another as a preliminary step to a full-scale merger.

Some securities analysts believed that the original Pearson- Elsevier deal was at least partly motivated by a desire to fend off unwelcome attentions from potential predators - in Elsevier's case the late Robert Maxwell and, ironically, Reed International.

Yet within a year, Elsevier was forced to deny it was preparing a bid or merger talks with Wolters Kluwer, a fellow Dutch publisher in which it held a one-third stake.

In light of last week's eruption, it may be significant that NRC Handelsblad, Elsevier's quality newspaper, reported in February 1990 that any merger with Pearson was now off, mainly because of 'Dutch sensitivity over the company ever losing its identity'.

Before long, Elsevier, which then had a reputation as an acquisitive company, was holding talks on a possible merger with VNU, the Netherlands' largest publishing company. The deal would have created a big international publishing group with extensive operations in Europe and the US.

Joep Brentjens, chairman of VNU, confirmed that talks had taken place but said the two companies were unable to agree on the range of businesses that the merged group should pursue.

It was not until April 1991 that Pearson and Elsevier made the final decision to part, following Elsevier's pounds 440m purchase of Pergamon from Maxwell. 'It was almost like changing brides,' Mr Vinken bizarrely remarked.

By then Lord Blakenham, Pearson's chairman, was able to blame the rupture on the Gulf War and the relative movements of the pound and the guilder, as well as the two companies' share prices. But earlier ambitious schemes for jointly run European financial newspapers never got further than a telephone-based financial news service in the Netherlands in association with the Amsterdam Stock Exchange.

Possibly Lord Blakenham's insistence on Elsevier board meetings being conducted in English did not encourage the closest relations. Needless to say, there was no question of the Dutch prevailing at the equivalent meetings at Pearson.

It is notoriously difficult to make mergers of broadly equal- sized companies succeed. After the initial polite noises, either one side becomes dominant or the two fall apart.

When a merger is international, the risks multiply. Unilever and Royal Dutch/Shell are two of the handful that have endured. As we explain below, they have done so mainly because of extremely complex and well-balanced organisational structures.

Of the latest attempts, the Swedish end of the engineering group, Asea Brown Boveri, has in effect been subsumed into what is a Swiss-based multinational. And at two recent Anglo-French mergers, papermaker, Arjo Wiggins Appleton, and CarnaudMetalbox, the can producer, the French sides have largely taken over.

From the start of the merger negotiations in 1992, Reed and Elsevier or - to be more precise - Mr Davis and Mr Vinken were at cross-purposes over the relative powers of the chairman and executive committee under the combined set- up. The 1992 merger document devotes four closely printed pages to management arrangements. Under these, Mr Davis would be deputy chairman and chief executive, but 'day-to-day responsibility for the combined operating business will be delegated by the board of Reed Elsevier to its executive committee.'

Although both sides compromised, that tension was never resolved. The Dutch agreed to promote Mr Davis to co- chairman of the executive committee, but insisted that the committee must have the last word.

Against his own inclinations, Mr Davis was apparently persuaded to go along with this arrangement by Reed's non-executive directors. But trouble flared again early this year, and events began to move towards last week's split.

Senior executives at Unilever and Shell point out that they are able to avoid such clashes by filtering out likely mavericks before they reach the board.

Reed Elsevier did not have that luxury, as Mr Davis was himself a prime mover behind the merger.

Now it appears that the Dutch will have the upper hand for several years at least, with possibly adverse implications for the group's ability to take difficult decisions.

Media analysts last week echoed Lord Matthews' verdict on Mr Irvine's elevation: 'Direction will come from Holland, and Irvine will go along with it.'

(Photograph omitted)

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