Legrand, a giant in lighting controls, home automation, electrical and low-voltage infrastructure, is acquiring Milestone AV, a leading provider of TV mounts, video projection screens and videoconferencing solutions.
The deal is valued at about $950 million.
The combined company will meld industry-leading brands in the home-technology sector including, from Milestone: Chief and Sanus (mounts) and Da-Lite (video projection screens); from Legrand: OnQ (infrastructure and mass-market home automation), NuVo (multiroom audio), Qmotion (motorized shades), Middle Atlantic (equipment racks and storage) and Vantage (lighting controls), among others.
If you’re in the home-technology installation business, at first blush this might seem like another big industry consolidation in the channel.
But it’s not. In fact, it seems to have little to do with “our” channel at all. Instead, Legrand’s play here is in the commercial A/V market.
That’s not to say it’s not a really big deal with some clear synergies.
Let’s look at some of them.
Note: Neither Milestone nor Legrand is not commenting officially about the acquisition at this time. The insights contained here are gleaned from public documents concerning the acquisition, as well as the author’s deep knowledge of both companies and the industry in general.
Commercial AV Products
The biggest highlight of Legrand’s investor presentation was the category it calls “AV Infrastructure & Power.” Between the two companies, they have a compelling suite of products for commercial AV installations. There is little overlap in their existing product lines and serious synergies when combined.
Imagine a corporate office, school campus or house of worship. Picture in particular the individual boardrooms and classrooms, with common assembly areas. These institutions need what Legrand and Milestone can offer combined … but not separately.
- TV mounts (Chief and Sanus, but Chief is the commercial line, and Sanus is largely residential)
- Video projection screens (Da-Lite), with video projector mounts (Chief)
- Mounts for monitors
- Back boxes for storage and power (Chief/Sanus)
- Video conferencing and content capture (Vaddio)
- Racks and Enclosures (Middle Atlantic)
- Power products (Middle Atlantic mostly, but also Raritan for IT)
- Audio/Video cable and connectors (C2G)
- Cable management (Wiremold)
- “Technical furniture” (Middle Atlantic)
Any given boardroom, for example, might need a combination of all these products: TV Mount (with back box, power and connectors), video projection screen (with projector mount), video conferencing and capture system, conference table with power and AV hookups, equipment rack, power, cable management …
Typically, one A/V professional would buy these products from multiple vendors. Legrand could provide them all.
As the presentation slide notes: “Together Legrand & Milestone Cover the AV Infrastructure & Power Market.”
Indeed, that seems to be the case.
Furthermore, some of the brands in this portfolio are tops in the industry, namely, Chief, Sanus, Da-Lite and Middle Atlantic (both power and racks). All together, the new portfolio could dominate the commercial A/V sector.
While there would certainly be some overlap there, the redundancies can easily be eliminated. Chief and Sanus make AV racks, for example. These value-priced solutions could either be eliminated or combined with Middle Atlantic’s higher-performance racks to create several tiers of product that suit all budgets and needs.
Middle Atlantic just entered the mount business last year. No need to pursue that product line now.
Legrand cites mid-term cost synergies stemming from production and sourcing. Clearly, both companies could utilize the same factories and suppliers for their metal works, including mounts and racks.
As noted above, typically one commercial AV professional would install the full gamut of gear in the combined Legrand/Milestone portfolio.
The dealers on the Legrand side would be from the Middle Atlantic business – about 3,500 companies.
On the Milestone side, the target dealers come from all of its core commercial brands including Chief, Da-Lite and Vaddio – about 6,000 dealers in all.
Milestone has also built lasting trust-based ties with strong distribution channels offering wide geographical coverage and access to a variety of end markets (corporate, hospitality, houses of worship, education, government and retail stores/restaurants). These have helped distribute Milestone products both efficiently and widely.
Certainly these relationships could benefit Legrand’s brands, as well.
The big question is: Will Legrand capitalize on these channel synergies?
History suggests: maybe not.
If you take a look at Legrand’s acquisitions on the residential side, the channel-synergy thing doesn’t seem to be a big part of the plan. Rather, Legrand goes after good, profitable companies that can stand alone in the channels Legrand serves – in this particular case, home-technology integrators.
For the core brands in this channel – Middle Atlantic, OnQ, NuVo, Luxul, QMotion and Vantage – little is being done to bundle these offerings for dealers. There is minimal cross-selling, and little online integration for information, purchasing, support and the like.
The case on the residential side is similar to that of commercial A/V – where virtually all dealers install the products that Legrand and Milestone sell.
In residential, virtually all integrators install the products that Legrand sells to that channel – racks, structured wiring, multiroom audio, networking, motorized shades and lighting controls.
So it might seem obvious that Legrand would make every effort to get dealers to purchase all these categories from one source. That simply hasn’t been the highest priority for Legrand. Instead, Legrand managers understand their respective channels and they make the best possible decisions for each product category.
There might be synergies on the distribution side, however. Once you have relationships with major distributors – like OnQ always had – it’s easier to bring in additional brands from the same company.
This could be the same for Legrand + Milestone; however, while I’m not terribly familiar with commercial A/V, I would imagine that most distributors in the channel already carry both Chief and Middle Atlantic. Perhaps they might also bring in some other Legrand products such as Luxul networking.
I think Legrand can exploit channel synergies on the commercial side better than it can on residential. In the home market, Legrand’s products lines are quite disparate – window treatments, audio, networking, lighting controls…
Each category takes training, and each is rather complicated. You can’t very well train integrators on an entire ecosystem that includes Legrand products.
Switching costs would be high for many of the Legrand residential product lines. Dealers would want to stick with what they know.
That wouldn’t be the case in commercial A/V. Mounts, racks and projection screens are pretty interchangeable. Legrand could train commercial integrators to sell and install all of these products (plus Vaddio video capture) in a single boardroom, for example.
In its presentation deck, Legrand points to Milestone’s dedicated support teams in the commercial AV sector: 100 in direct sales and technical support, 90 in customer care. Milestone also has “digital best customer training”, both online and in person.
This support infrastructure would be a huge boon for Middle Atlantic and perhaps other Legrand lines.
Discover why mass notification makes sense for commercial integrators as a way to expand existing projects and secure new clients.
Other Potential Synergies
Sanus is huge in big-box stores, including Target, Best Buy, Costco and Walmart. Milestone also has a brand called Echogear (rebadged Sanus?) sold through eBay and Amazon.
Legrand has many DIY lines that could be suitable for retail, including surge protectors, cable management and networking gear.
I doubt the retail synergies will amount to much, at least in the short term.
Legrand has many relevant product lines for commercial integration projects. Nothing would complement Milestone products like Middle Atlantic, but certainly these Legrand products are found in every commercial job:
- Networking (IT) gear (Luxul)
- Network infrastructure (OnQ, Ortronics)
- Light fixtures (Pinnacle, OCL)
- Lighting controls (Vantage, Wattstopper)
- Electrical infrastructure (Pass & Seymour)
- Large industrial wire-management systems and cabling (Cablofil, Electrotrack, Quicktron)
- Data-center gear (Raritan)
- Motorized shading systems (Qmotion, Solarfective)
- Purchase price of $950 million represents about 9x Milestone’s EBITDA
- Legrand’s 2016 revenues were about $5.7 billion.
- Milestone revenues were $464 million for 2016.
- Legrand pegs its potential market to be about $115 billion – $100 billion in electrical infrastructure and $15 billion in “digital infrastructure.” The latter includes more than $5 billion for “AV infrastructure and power,” which is the driving motivation for the acquisition.
- Milestone has more than 360 patents, over 100 engineers and product development professionals and more than 5,000 SKUs
- History: Sanus and Chief merged in 2004, forming Milestone AV. Duchossois Group acquired Milestone in 2008 (Duchossois also owned AMX at the time). Da-lite merged into Milestone in 2011. Pritzker Group acquired Milestone in 2013. Legrand acquired Milestone from Pritzker in 2017.