My Thoughts on the Blockbuster Air Liquide Purchase of Airgas

Bonjour everyone! Pass the Dijon mustard!
Congratulations to Airgas founder Peter McCausland for the recent sale of Airgas to the French company Air Liquide for $10.3 billion. Has there ever been a larger sale in the history of the welding industry?
I doubt it.

In my view, this created an enormous amount of value for Airgas shareholders, employees, vendors, customers, and our country by implementing a very significant strategy known as “overcoming business fragmentation”. I first read about this strategy at the Harvard Business School in a famous book titled Competitive Strategy by Professor Michael E. Porter. As I see it, is a great example of brilliantly implementing this very effective strategy in the real world.

In Competitive Strategy, Porter describes four critical business advantages that I think are illustrated by this purchase.

• EXPERIENCE CURVE: Experience is everything. But it can take awhile to acquire.
When two companies combine, you can accelerate down the experience curve. A purchase
can pick up decades worth of industry experience in a very short time. Probably, in months
not years.

• PURCHASING ECONOMIES OF SCALE: When combining two companies, you can
take advantage of economies of scale. You have more unit volume and hence more leverage
on suppliers. Therefore, you are able to obtain considerably better pricing and terms from
suppliers because of more volume purchases and lower costs by consolidating vendors (i.e.,
few vendors equals even more leverage). Economies of scale also provides the opportunity for
vertical integration, such as making your own compressed gases for sale.

• SALES ECONOMIES OF SCALE: Lower costs from economies of scale provide not
only more competitive pricing, but also more customer knowledge. It is a huge competitive
advantage in any market to know who buys what, when they buy it, how they buy it, why they
buy it and who pays for it.

• FINANCING ECONOMIES OF SCALE: Leveraging financial strength is another
major advantage of consolidating businesses. Each business can be leveraged to buy even
more businesses, especially if one is buying like businesses. If one is buying similar businesses
and the track record of running them is good, borrowing is easier. Financing economies of
scale make it easy for a lender to understand the why and the what of your business. This
makes terms more favorable, which is a factor of the amount of risk. After all, banking and
financing are good theater.

Maybe Porter’s book should have a sub-title, “How to Become a Billionaire Over & Over Again”….

Posted in Airgas Competitive Strategy Critical Business Advantages Business Curve Purchasing Economics Of Scale Sales Economies Of Scale Financing Economies Of Scale Professor Michael E Porter

Click to search
What's New?
Chance to WIN a $250 Amazon Gift Card when you share your flashback near miss storyMy Thoughts on the Blockbuster Air Liquide Purchase of AirgasFive ways to keep your jobIntroducing the NEW SuperFlash IBEDA Inline Fuel Gas and Oxygen FiltersAsk Spark!
Flashback Arrestors (5)Check Valves (3)Spark Speaks (2)Flashback (2)Torches (2)Flashback Arrestor Demo (2)Oxygen (2)Reserve Gas (1)Simax (1)Pipelines (1)Hydrogen (1)Stainless Steel Flashback Arrestors (1)Manifolds (1)Line Drops (1)Demax (1)Torch And Regulators (1)Tip Sizes (1)Flow Rates (1)High Flow Flashback Arrestor (1)Argon (1)Consumption Rates (1)Free Online Classes (1)Flame Barrier (1)Flammable Gases (1)Online Safety Courses (1)Fabtech AWS (1)A Size Connections (1)Tips (1)High Flow Flashback Arrestors (1)Gas Mixer Adjustable Gas Mixer Shielding Gas Welding (1)IBEDA Flashback Arrestors Welding Cutting (1)Stainless Steel Flashback Arrestors Oxygen Hydrogen Flammable Gases (1)Flashback Arrestor Check Valves Fuel Gas Air Gas Thermal Process Systems (1)Amazon Gift Card Near Miss Preventing Serious Injury Safety (1)Airgas Competitive Strategy Critical Business Advantages Business Curve Purchasing Economics Of Scale Sales Economies Of Scale Financing Economies Of Scale Professor Michael E Porter (1)Technology Managers Keeping Your Job (1)GF 25 Inline Fuel Gas And Oxygen Filter Pipelines Technical Gases (1)Vendor Awards (1)GAWDA News (1)Safety Demonstrations (1)Safety Seminar (1)Regulators (1)Nitrogen (1)IBEDA Germany (1)Leak Detection Solution (1)Helium Vacuum Leak Testing (1)Leak Testing Equipment (1)Fabtech 2014 (1)A Size Flashback Arrestors (1)Medical Oxygen (1)Safety Program (1)Equipment Maintenance (1)Employee Training (1)Adjustable Gas Mixers (1)Gas Safety Checklist (1)Welding And Gas Safety Awareness (1)Technology (1)IT (1)AWS (1)WEMCO (1)The Right Size Flashback Arrestors (1)OxyDetect Analyzers (1)General (1)Testing (1)Checkvalve (1)Flashback Arrestor (1)Gas Mixer (1)Normal Gas Flow (1)SuperFlash Points Issue 1 (1)Hose Burn Back (1)Reverse Gas Flow (1)Quality Flashback Arrestors (1)Stainless Steel Flame Barriers (1)Mini Spray Jet (1)Thermal Spray Equipment (1)Soap And Water Solutions (1)Cylinder Maintenance Chemicals (1)Uni Spray Jet (1)Duraloy (1)PVGD (1)Liquid To Gas Refilling System (1)Duraloy Plus (1)Leak Test Solution (1)Custom Burners (1)High Gas Flow Capacity (1)Replacing Flashback Arrestors (1)DGN Flashback Arrestors (1)Flashbacks (1)Gas Flow (1)OSHA (1)Heating Solutions (1)Guaranteed Rapid Response Request Form (1)SuperFlash Community Service Days (1)Gas To Gas Filling (1) + Show More
Newsletter Signup

Be the first to know about new products, industry news and more!