Acquisitions are a part and parcel of the culture of Group Legrand. The group has a long history of acquisitions and has made 32 since 2004. We have an even stronger legacy with 140 companies being acquired by the group globally since 1970. Globally 50 per cent of the Legrand group’s growth has come organically and another 50 per cent has come through acquisitions. This is true of the group in India also. The Legrand group entered India through the acquisition of Morarjee Dortmund Smith in 1996. We have followed it up with three more acquisitions. It is interesting to see that each of the acquisitions is different in terms of size, location, culture, people, talent and value.
Year one of acquisition
In our opinion, the first year post acquisition doesn’t mean restructuring of people, designations or locations, thus translating into zero restructuring of the organisation. Instead, we believe that the first step in an acquisition should be the integration of people, culture, talent, systems and processes. For this, we need one common platform, and organisational values play a major role here. These values are the key link to business orientation, ethical practices, people development and product innovation.
When you acquire a company, a substantial part of the asset that you acquire is the brand. The brand should be nurtured without disturbing its ethos.
While embarking on the first year of journey (post acquisition), one has to keep in mind the background of the acquisition, and the parameters on which it is based. In our opinion, the success of an acquisition depends to a large extent on the selection of the right partner. The partner should make sense in terms of business as well as cultural values, and both the parties should have a common interest and understand each other well. Numeric, one of the Indian companies we acquired is a perfect example for this. With this association we were able to enter the UPS business in India. This segment of ‘Energy quality’ complemented our core business of ‘Energy distribution’. It opened new doors in terms of market access and customers to each existing business.
The first priority after an acquisition is the human workforce that makes the place. This is very critical because people are different and how each employee aligns with the new entity is vital to the success of the acquisition. We don’t try to impose our people or recruit employees from day one. That is something, which we have never believed in. Since we target successful companies, which hold strong leadership positions in their markets, we try to leverage the strengths of the acquired company in terms of products and people. We try and invest in developing it further rather than restructuring the success story. And yes, this is what has happened with the last four entities that we acquired in India. In all these acquisitions the business has grown based on the existing teams. Moreover, the senior management team of the Legrand Group in India today comprises people who have been with us for over 17 years. This includes the CFO, the COO and the HR Head.
Today, our team size in India is more than 6,500 people, out of which only three are expatriates. These expatriates are the interface with the group, to ensure good understanding of group objectives and values as well as to ensure good internal information about specifics of the Indian market and environment. This ensures best flow of information for taking strategic decisions as well as for operational actions. If you look at the board of Legrand in India, the Emeritus chairman is Mr. VP Mahindru who was the former owner of Indo-Asian, the chairman of the board is Mr. Chellappan, who was the former owner of Numeric, and Mrs. Morarji who was the former owner of MDS, is still a member of the board, 18 years after the acquisition.
Our objective post an acquisition is to create value. We put in place group processes and centralised systems for operations, with the objective to improve performance, ensure best quality for our products, and to develop internal skills. We do keep challenging our employees though, be it in terms of giving them targets (quantitative and qualitative) or in terms of coming up with out-of-the-box solutions for problems that do not have simplistic solutions. Over a period of time obviously, the talented ones who prove themselves, get an opportunity to move on to new, more challenging as well as rewarding roles in India and globally. For instance, the previous Legrand marketing director for India has now joined France, and is in-charge of group strategy.
Retention of acquired brands
Another key pillar of the Legrand philosophy is to retain acquired brands. When you acquire a company, a substantial part of the asset that you acquire is the brand. The brand should be nurtured without disturbing its ethos. In Legrand, we realise the value of a brand that has been built by the earlier management and prefer to retain the product brands as they have a certain value for the customer segments they address. Today, we have 30 to35 brands in the group. On their own, I would say, each one has a strong legacy and there is no reason for these brands to not co-exist. By changing the name, we would put at stake the essence of the company itself. For example, we acquired Indo-Asian, a company which manufactures & markets low voltage switchgear and miniature circuit boards in the year 2011, because it had a strong presence in the mid-level segment of the product categories we dealt with and it complimented well with the high end positioning of the Legrand brand. Thus, we retained the acquired brands with the objective of developing each one of them with their own identity, DNA and product positioning. The low switchgear products from Indo-Asian complemented well with high-end switchgear products from Legrand. Numeric and the latest entrant to the group fold Adlec, all operate as separate entities in the market place.
Another major part of the first year activity for the parent company should be to meet the key stakeholders, particularly the customers. The company should explain its strategy and plans and the potential benefits that the new association will create for them in terms of future growth. The objective is to reiterate that the business is as usual, and that we rely on their support to create a win-win scenario even under changed circumstances. In short, the first year is all about reassuring and integrating at the same time. It is about retaining and developing people, securing the business and progressively creating the base for future development.