Sales: FFr 11.50 billion (1996)
Stock Exchanges: Paris
SICs: 3613 Switchgear and Switchboard Apparatus; 3625 Relays and Industrial Controls; 3643 Current-Carrying Wiring Devices
From its home base in Limoges, France, Legrand SA is a worldwide leader in the design, manufacture, and distribution of low-voltage fittings and accessories. Where other companies may be tempted toward diversifying their business, Legrand has maintained a focus and dedication on this single market, producing some 30,000 different products for nearly every aspect of low-voltage electrical installation. The company’s products serve six principal markets: lighting controls, including switches, sockets, dimmers, and timers; protective devices, such as circuit breakers, grounding devices, distributors, and enclosures; electrical distribution, including skirtings and trunkings, terminal blocks, and cable ties; communications, from door chimes to intercoms, and home and office audio and video installations; safety products, including fire alarms, burglar alarms, and emergency lighting; and automated home and office fittings, including motion and presence detection and remote-controlled and automatic lighting and fixture programming. Sales and marketing are generally directed at wholesalers, distributors, and centralized buyers, which then bring Legrand products to professional users and to resellers for the consumer market.
Present in 46 countries as of the 1990s, Legrand had captured approximately eight percent of the global low-voltage fittings market. In its home country, the company’s share of that market rose to 40 percent; France also provided 40 percent of the company’s annual revenues. Legrand held about 20 percent of the European low-voltage fittings and accessories market, with Italy representing its strongest sales base outside of France, contributing more than 20 percent of annual revenues. Sales to the United States and Canada, through subsidiary Pass & Seymour and the 1996 acquisition of The Watt Stopper, represented approximately six percent of annual revenues. The company also maintained a strong presence in South America, and was moving to step up its share of the growing Asian markets.
Responding to the variations in electrical standards and regulated norms, as well as variations in consumer preference, among the countries and world regions of the company’s market, Legrand established its international presence through carefully planned acquisitions. The company typically moved into a new market by first opening a representative office, from which the company could study the local needs and conditions of the market. Legrand would next seek to acquire a mature business already operating within the market, focusing on businesses that offer synergy with Legrand’s existing product lines. The company avoided hostile takeovers, and generally left the management and employees of new subsidiaries in place after their acquisition. As of 1996, subsidiaries operated within a largely decentralized structure, developing products and marketing and distribution activities for their specific markets. Legrand consistently focused on long-term growth over short-term gain, even during periods of constrained market conditions, pumping significant percentages of its annual sales into capital investments and into research and development of new and existing products. In 1996, the company’s research and development expenditures accounted for four percent of its total revenues.
In 1996 Legrand was led by chair and CEO François Grappotte. More than 42 percent of the company’s stock was held by the Verspieren and Decoster family, which had maintained control of the company since 1944. Despite its international presence, Legrand remained a firm fixture of Limoges and the Limousin region in France. The company emphasized its allegiance to Limoges by opening in 1996 a 6,900-square-meter, state-of-the-art facility in that city, as well as a new, 10,000-square-meter headquarters building. Approximately one-quarter of Legrand’s employees were based in the company’s Limoges and Limousin-region facilities at that time. In 1996, the company posted net sales of FFr 11.5 billion and realized net earnings of FFr 927 million.
A Porcelain Maker from the Second French Empire
Legrand’s origins can be traced back to 1860, when Mr. Barjaud de Lafont founded a small studio for making porcelain tableware on the Route de Lyon in Limoges. In 1865, the company’s activities were taken over by the brothers Vultry, who maintained the business into the next century. In 1904, Frédéric Legrand assumed ownership of the business, giving the company his name. Over the next forty years, Legrand grew to become one of the best-known names in the porcelain tableware industry in the Limoges area. Just after the First World War, however, in 1919, the company added a second business, a small factory producing electrical fittings, using the company’s porcelain as insulating material. Incorporating as a “société anonyme” (SA, or “anonymous society”) in 1926, the company continued to build on its reputation for fine porcelain, winning the Gold Medal at the Universal Exposition in 1937. By then, the company employed some 1,000 people. Legrand died in 1936.
The outbreak of the Second World War put a halt to the company’s growth. Sales collapsed and the company saw its employee base cut by more than half. As the war drew to a close, Legrand was bought by Pierre Verspieren, who had founded Lloyd Continental, an insurance company, in the north of France in 1920. In 1945, Verspieren turned over direction of the company to his son, Jean Verspieren, and son-in-law, Edouard Decoster. The brothers-in-law would continue to lead the company until well into the 1980s.
The Legrand factory was destroyed by fire in 1949. Verspieren and Decoster rebuilt the factory on its original site on the Route de Lyon, which by then had been renamed the Avenue de-Lattre-de-Tassigny. The company’s focus, however, turned now to its still-small electrical fittings business, and in 1950, Legrand abandoned the porcelain business altogether.
The company’s timing could not have been better. France—along with most of the West—was entering a new period of growth as Europe underwent a postwar reconstruction. Although luxury goods, such as porcelain, remained out of reach for most until the economic boom years of the late 1950s and 1960s, housing construction and renovations and the rebuilding and modernization of French industry brought a huge demand for Legrand’s electrical fittings and accessories. The company expanded its headquarters factory, then, in 1953, extended beyond its original Avenue de-Lattre-de-Tassigny location, opening two new plants in Limoges.
The company’s first acquisition came in 1956, when it acquired Electro Sécurit, renamed Legrand Antibes, in that French colony. By 1964, Legrand had begun to expand throughout the French Limousin region, opening a factory in Châlus. Company facilities spread beyond Limousin, including plants in Pau, in the Pyrénées region, and in the Normandy region.
International Expansion from the Mid-1960s
Legrand’s taste for international expansion came with the opening of the company’s first subsidiary beyond France’s borders, in Belgium, in 1966. While continuing to extend its reach throughout much of France itself, the company began its long program of expansion through acquisition, concentrating at first on the European market. In 1970, in part to fuel this expansion, Legrand went public, trading on the Paris exchange. In that year, the company’s net earnings passed the FFr 10 million mark. In 1972, with sales rising across Europe, the company opened a central distribution facility for its finished products in La Valoine. By the middle of the decade, international sales accounted for 19 percent of the Legrand group’s consolidated net revenues.
Two years later, Legrand made its first move outside of Europe, entering the South American market by acquiring Pial in Brazil. The company’s growth continued through the second half of the decade, including the company’s move into the British market with the acquisition of a small company in Milton Keynes. On the home front, Legrand acquired Arnauld Fae, then a subsidiary of Compagnie Générale d’Electricité, in 1979. By 1982, sales had grown sufficiently to warrant the opening of a second distribution center for the company’s finished products, in Marly-la-Ville. The following year, Jean Verspieren, who had been acting as chair of the company, died. He was replaced in that position by Edouard Decoster, who continued to serve as company president as well. In that year, however, Grappotte, who had spent six years conducting international trade negotiations within the French government’s trade department before working for Rothschild’s Bank and then the engineering concern CEM, joined Legrand as the company’s general manager. In 1988, Decoster retired to the position of honorary chair, naming Grappotte as chair and chief executive of the business, still largely controller by the Verspieren-Decoster families. Under Grappotte, who would step up the company’s expansion, the family remained influential in the company’s management. As Grappotte told the Daily Telegraph, “I am given all the latitude I want to do well— and none to do badly.”
In 1984, Legrand took its first step into North America, acquiring rival companies Paas & Seymour and Slater Electric and forming the company’s Pass & Seymour Legrand subsidiary, selling products under the Trade-Master brand name. Meanwhile, the company was also expanding its presence in the New World, entering Chile and Venezuela, Canada, and Mexico by the end of the decade. By the mid-1980s, the company’s revenues had grown past FFr 4.5 billion, for operating earnings more than FFr 567 million. Sales came from 22 countries, making Legrand continental Europe’s leading supplier of low-voltage electrical fittings and accessories. In that year, sales outside of France accounted for 35 percent of the company’s consolidated net revenues, compared to 19 percent just ten years before.
A Global Leader for the 1990s
By then, however, the company began looking for a larger-sized acquisition. In 1987, it made an attempt to trump the takeover bid of RTZ Corp. for MK Electric PLC of England. The acquisition of MK Electric, which generated nearly 141 million pounds in 1986, would have represented a substantial increase in Legrand’s U.K. sales, which remained at about 20 million pounds at the time. Yet, when RTZ raised Legrand’s bid by eight million pounds, Legrand backed off from the takeover, considering the price to be too high. As Grappotte told the Daily Telegraph, “We do not consider it a defeat. It was a cold, purely rational decision.”
The failure to acquire MK Electric sent Legrand looking elsewhere for its next major acquisition. In 1989, the company found this in B Ticino of Italy. The company paid FFr 1.1 billion to acquire 45 percent of the Italian company in June of that year and completed the acquisition of total control of B Ticino in December 1989. Adding B Ticino’s FFr 2 billion in revenues, 4,500 employees, and dominant share of the Italian market to the Legrand Group of companies had an additional benefit over the failed MK Electric bid: the Italian market’s electrical fittings were based on the common European standards, presenting Legrand with greater synergy. The acquisition would also help drive the Legrand group’s total sales to nearly FFr 10 billion by the end of the decade and further solidified the company’s position as the leader in the European market. International sales had by then come to represent 57 percent of the company’s consolidated net sales.
Despite the increasingly important position of the international market for Legrand’s revenues, the company remained true to its Limoges roots. In 1992, the company inaugurated a state-of-the-art production facility in its home town, built for a cost of FFr 600 million. At 6,900 square meters, the Site Electronique Limousin (SITEL) brought the company into new territory, combining its growing activities in electronics production—including the fabrication of the company’s own printed circuit boards—onto one site. At the same time, Legrand began construction on a new, 10,000-square-foot headquarters facility, maintaining the company’s presence on the Avenue de-Lattre-de-Tassigny.
Moving into the 1990s, Legrand ran headlong into the worldwide recession. Its core French market experienced a slump, as did much of Europe; its Brazilian subsidiary slipped into the red; and the company’s U.S. subsidiaries, saddled with aging production facilities, were losing money. Supported by the Verspieren-Decoster families, Grappotte’s and Legrand’s response to the difficult market conditions was to continue to invest in the company’s long-term growth, maintaining a capital investments budget of as high as ten percent or more of the company’s annual sales, while spending as much as a third of revenues on the development of new products. At the same time, the company resisted the urge to diversify, maintaining its focus on its electrical fittings markets.
While internal growth faltered with the continuing recession, Legrand continued its steady trail of acquisitions, adding Molveno of Italy, Bufer in Turkey, and Pieron and Baco, both in France, in 1992. In January of following year, the company moved into Hungary with the purchase of 98 percent of that country’s Kontavil and increased in its U.K. holdings with the purchase of Tenby Industries Limited, a specialist in electrical installation accessories. Although the company saw its net earnings drop during the initial years of the decade—from a profit of FFr 700 million in 1990 to a profit of FFr 578 in 1993—the company remained on solid financial ground and largely debt free. Meanwhile, Legrand continued its policy of investing about ten percent of annual revenues in new acquisitions each year.
With the company’s 1994 revenues topping FFr 10 billion and net income on the rise again, reaching FFr 785 million for the year, the company launched another series of acquisitions, bringing Britain’s Power Centre and Italy’s RTGama into the group. By the end of 1995, the company’s net revenues had risen past FFr 11 billion, and the company’s net earnings climbed to FFr 923 million.
The following year, the company added four more subsidiaries, introducing Legrand to Poland with the $31.4 million purchase of 75 percent of Fael, in Zabkowice; bringing the company into India with the purchase of MDS, the largest producer of miniature circuit breakers in that country; adding Colombia to the group with the purchase of Luminex, Colombia’s leading manufacturer of electrical fittings, which also held operations in Brazil and Mexico; and finally consolidating its position in the United States with the purchase of The Watt Stopper, the leading U.S. maker of occupancy and motion sensor products. These acquisitions help raise the company’s percentage of revenues from international sales to 60 percent and further enhanced Legrand’s position as the worldwide leader in the FFr 140 billion low-voltage electrical fittings industry.
The continuing economic crisis in France, as well as in many of Legrand’s principal European markets, modified the company’s growth into 1996. Net revenues rose to FFr 11.5 million for the year, while net earnings remained flat, at FFr 927 million. Nonetheless, Legrand’s steady—even stubborn—policy of investment gave the company the promise of renewed growth, particularly as Legrand began taking the first steps to enter the burgeoning Asian markets. As Grappotte told Le Monde, “To wait until the economy is healthy to invest is the best way of being left behind by the market. Developing our products is the surest way of winning added value and finding additional growth that the market is no longer offering spontaneously.”
Arnould-FAE; Baco; Inovac; Legrand snc; Martin & Lunel; Planet-Wattohm; BTicino (Italy); BTicino de Mexico (Mexcio); Legrand (Germany); Legrand Austria; Legrand Electric (U.K.); Legrand Electricia (Portugal); Legrand Electrique (Belgium); Legrand Espanola (Spain); Pass & Seymour Legrand (U.S.); Pial (Brazil); Legrand (Italy); Tenby Industries (U.K.).
“Legrand Refuses to Sacrifice Long-Term Development for Short-Term Gain,” Le Monde, December 4, 1996.
Tunbridge, Tim, “Legrand Plans to Grow but to Stick to Core Businesses of Fittings and Wiring Accessories,” Electrical Review, June 11, 1992.
“Verspieren/Decoster Family,” Forbes, July 15, 1996, p. 195.
Waller, David, “Chance for Big UK Push,” Financial Times, December 9, 1987, p. 26.
Wheatcroft, Patience, “Grappotte Switches on to Legrand Plan,” Daily Telegraph, July 9, 1990, p. 27.