Dive Brief:
- Schneider Electric announced Monday that it is replacing its CEO, Peter Herweck, effective immediately.
- The board of directors decided unanimously to appoint Olivier Blum as CEO. Blum has held various executive positions in the company, including executive vice president of Schneider Electric’s energy management business, chief strategy and sustainability officer, chief human resources officer and a variety of operational roles, the energy management giant said in a news release.
- The decision to remove Herweck from office after just 18 months in charge comes amid “divergences in the execution of the company roadmap at a time of significant opportunities,” according to the release. Analysts at J.P. Morgan and Jefferies described the move as surprising, given Schneider Electric’s robust financial performance.
Dive Insight:
Last Wednesday, Schneider Electric reported organic 8% year-over-year growth in its third quarter revenue. The growth was driven by a 15.1% year-over-year increase in North America revenue in the third quarter on the back of an 18.3% surge in energy management revenue across the region and continued strength in its data center and infrastructure end markets.
Given the financial performance of the group in recent periods, the clear strategy and targets outlined with the November 2023 Capital Markets Day, the decision to replace Herweck with Blum is a “major surprise,” analysts at J.P. Morgan said Monday in a client note shared with Facilities Dive. CFO Hilary Maxson and Head of Investor Relations Amit Bhalla hosted a short call on Monday morning, noting that the board of directors “felt the strategy was not being as decisively or collaboratively implemented as hoped and that the CEO’s style was not a fit,” they said.
During its Capital Markets Day last November, Schneider Electric said its financial targets include a cumulative annual growth rate of between 7% and 10% from 2023 through 2027 and that its long-term ambitions include organic revenue growth north of 5% on average across the economic cycle.
The strategy outlined at Capital Markets Day in November 2023 involved leveraging digital and electrification technologies to support sustainable solutions for buildings, data centers and industrial infrastructure; and a commitment to developing open, integrated solutions to enhance customer management across the product lifecycle.
“There seems to have been a disagreement as to the style of management particularly around collaboration,” Jefferies analysts said Monday in a separate note shared with Facilities Dive. ”The board no longer believed Peter was the right fit, and they did not want the company to lose steam” in the highly attractive markets around electrification, automation and digitalization,” they noted.
In April, Schneider Electric said it was in preliminary talks with a U.S.-based software company, Bentley Systems, regarding a potential strategic transaction. That did not materialize, however, the company announced in May. Given the timing of that deal not seeing fruition, “we would not rule out disagreement on M&A as a major reason for the [CEO] change,” according to Jefferies’ analysts. Analysts at J.P. Morgan, however, noted that “disagreements on M&A were not cited as a factor.” The board was involved in discussions concerning Bentley Systems and “Bentley is not cited as a part of this decision,” J.P. Morgan said.
Under guidance from the board, the governance, nominations and sustainability committee conducted a “comprehensive process to propose a successor” for the role of CEO, Schneider Electric said in its announcement. “Several high-quality external and internal candidates were considered,” Fred Kindle, vice chairman and lead independent director at Schneider Electric, said in a statement. The board determined that Blum’s skills, alongside a “strong track record in setting a vision, defining a strategy and executing the required transformations,” made him “the perfect candidate to lead the company,” Kindle noted.
“For more than 30 years, Olivier has been an outstanding and transformative leader at Schneider Electric, deeply understanding our business, our operating model and culture and focusing on future technology and strategic development, while delivering strong and consistent operational performance, as shown by the acceleration of Energy Management under his tenure,” Schneider Electric Chairman Jean-Pascal Tricoire said in a statement.
Blum has been a member of Schneider Electric’s Executive Committee since 2014, according to the company's announcement. Since 2020, he has also served as non-executive director - member of the remuneration committee at AVEVA, an engineering and industrial software firm Schneider Electric acquired in January 2023,
Herweck stepped in as CEO of Schneider Electric in May 2023, replacing Tricoire, who had led the company for two decades.
Blum’s appointment was well received by analysts. “From a succession perspective, [Blum] .... makes sense as the continuity candidate for a strategy that remains unchanged,” J.P. Morgan noted.
“The fact that Blum has been running the [energy management] / data center business for the past [three] years should give investors some confidence that he knows large parts of [Schneider Electric] well,” Jefferies analysts said, noting that Tricoire “still has a tight grip in the business and will not risk any future upset in strategy.”
Separately, the company said on Monday that it is investigating a cybersecurity incident amid a suspected threat actor’s claim that it gained access to company data. The company has previously been a target for ransomware groups. In January, Schneider Electric was subject to a ransomware attack that affected its sustainability business, directly impacting its EcoStruxure Resource Advisor platform used by over 2,000 companies globally.
