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Analysis: Legrand’s acquisition of Milestone AV

Yesterday we reported that Legrand is set to acquire Milestone AV for $950 million. It’s clear that the purchase was an attractive one for Legrand, for a number of reasons.

First, Milestone is of itself a strong performer: it has a strong market position, with many of its products the number one or number two in their market segments; it is a trusted brand, known for good customer service, and it has an experienced management team. Also it’s profitable: its adjusted operating margin in 2016 was 21%, on sales of $464 million.

Then, there’s the issue of sheer reach. According to the press statement, Milestone’s has strong relationships with 6,000 professional AV dealers, compared with Legrand’s 3,500 dealers for Middle Atlantic Products.

Beyond the numbers, though there are clear possibilities for each company to increase presence in areas where the other is currently stronger. So Milestone can benefit from Legrand’s relationships with electrical, IT and data communication distributors, and Legrand can leverage Milestone’s office locations in North America, Europe and Asia to build its AV infrastructure and power business.

And finally, there are the synergies that typically arise whenever large companies merge: increasing purchasing power, optimising administration and improving or redeploying manufacturing.

As Gilles Schnepp, Chairman and CEO of Legrand, commented when announcing the acquisition: “Milestone’s robust leading positions, well-known brands, businesses supported by strong social and technological megatrends, customer-centric approach, ongoing innovation, and active [corporate social responsibility’ policy are key assets which make this acquisition a highly valuable move that ‘ticks all the boxes’ of Legrand fundamentals.”