2007 reference document - Legrand

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THE GROUP’S BUSINESS
Legrand’s business
raw materials such as leather, wood and steel) and solutions
based on new technologies, such as its universal media plug,
the fi rst W i-F i outlet integrated into a range of wiring devices,
the automatic rearm circuit breaker and its home automation
offerings, In One by Legrand, My Home, Lubnet and Miro, which
simultaneously manage lighting, security, heating and sound
distribution in a simple and ergonomic manner in residential
buildings. The Group has also developed a special expertise in
reducing energy consumption with systems developed by The
Watt Stopper (presence detectors, motion detectors, lighting
management in the commercial sector).
Legrand has developed signifi cant know-how in the integration of
innovative technologies into its products and solutions offerings.
This expertise presents an opportunity for sales growth as it
allows end-users to constantly benefi t from the widest possible
choice in technologies.
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5.1.4.5 - QUALITY-BRAND PORTFOLIO
WITH COMPLETE RANGE OF PRODUCTS
AND SYSTEMS
With its world renowned general brands, such as Legrand and
Bticino, as well as an expansive portfolio of 34 well-known local
and specialist brands, Legrand believes that it offers a product
range that its customers, distributors, electrical professionals,
specifi ers and end-users associate with quality and to which
they remain loyal. In particular, Legrand believes that electrical
professionals and specifi ers, which are the principal drivers of
demand, have for many years trusted its brands, products and
systems for their security, reliability and ease of installation and
use.
Legrand believes that its catalogs, which feature more than
150,000 references organized into some 80 product families, are
among the most complete on the market. Moreover, Legrand
believes that it is the only market player offering wiring devices
that both comply with the majority of international electrical
standards and respond to the needs of electrical professionals
and end-users, particularly due to their ready integration into
systems.
Legrand constantly leverages its brand portfolio onto the market
with its permanent “push and pull” strategy, which aims to market
its product offerings to electrical distributors and stimulate
demand for its products from electrical professionals, specifi ers
and end-users.
■ 5.1.4.6 - RECOGNIZED GROWTH EXPERIENCE
THROUGH TARGETED ACQUISITIONS
In the fragmented market context in which Legrand operates,
the Group has a demonstrated ability to identify and complete
acquisitions of small- and medium-sized companies that
generally are well-known leaders in their local markets and which
fulfi ll Legrand’s criteria of complementary technology, location,
markets or products. In addition, Legrand has successfully
REFERENCE DOCUMENT 2007 - legrand
exploited both commercial (complementary products, catalogs
and sales networks) and cost synergies. These synergies have
allowed the Group to increase the profi tability of the companies
it acquires, which usually have initially lower operating margins
than the Group.
Since 1954, Legrand has acquired and integrated more than
120 companies into its global network. Growth by self-fi nanced,
targeted acquisitions has been a recurrent aspect of Legrand’s
growth model. In three years, Legrand acquired six companies
which generated annual net sales of between €10 million and
€100 million, representing total acquired sales of more than
€500 million.
Legrand expects to pursue a policy of external growth every year
while maintaining a disciplined fi nancial approach based on the
analysis of several criteria. Legrand uses an analytical model to
ensure that every acquisition:
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increases its local market share;
expands its product offering and portfolio of technologies;
enhances its presence on markets with high growth potential;
and
conforms to its fi nancial criteria (principally that the purchase
price on average represents valuation multiples less than
or equal to those applied to Legrand and other comparable
companies in the same sector with a similar market position
and growth potential; furthermore, the Group generally only
includes short-term synergies that relate to operating costs in
its modeling, except in exceptional circumstances).
The members of Legrand’s management team, who have a
thorough knowledge of local players, have developed close
relationships with the market players and maintain regular
contacts with companies identified as potential targets. A
dedicated corporate development cell is responsible for
monitoring the entire acquisition process and is particularly
responsible for coordinating work among the Group’s teams
involved in an acquisition.
Legrand’s ability to generate high cash fl ows of around 10% of
Group sales enables it to fund its own acquisitions in a virtuous
and recurring value creating process.
For 2008, the Group has announced the acquisition of PW
Industries, a North American specialist in ceiling cable
management for the commercial and industrial sectors. PW
Industries generated revenues of approximately $32 million in 2007
(see section 4.2.2 of this reference document)
■ 5.1.4.7 - EXPERIENCED AND MOTIVATED
MANAGEMENT
The majority of the members of Legrand’s senior management
team have, on average, 20 years of experience in the low-voltage
electrical installations industry. In addition, Legrand’s principal
managers (approximately 200 persons) directly or indirectly
hold, or may exercise rights to hold, approximately 5% of the
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