LEGRAND_REGISTRATION_DOCUMENT_2017

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GROUP OVERVIEW

A profitable growth strategy based on leadership development

2.2.2.2.2 Recognized experience in growth through targeted acquisitions In the fragmented market where Legrand operates, the Group has demonstrated its ability to identify and make mostly “bolt-on (1) ” acquisitions, i.e. businesses complementary to the Group’s activities and with leading market positions. In this respect, the ongoing role of Legrand’s country teams, which are very familiar with local market players, is to identify potential targets. Then, a dedicated Corporate Development unit is responsible for monitoring the entire acquisition process, and is specifically responsible for coordinating the work performed by the various Group teams that may be involved in the transaction. After the acquisition is completed, there follows the critical period of the “docking” of the acquired company to the Group. This is done by the country concerned, under continuous supervision by the General Management. Growth through targeted acquisitions is a full-fledged part of the Group’s development model. Indeed, the Group has acquired and “docked” more than 160 companies into its scope of consolidation since 1954. In particular, in 2017, Legrand carried out six external growth operations, including the acquisition of Milestone, the leader in Audio-Video infrastructure and power (see section 2.1.1.2.1). 2.2.2.2.3 Financial discipline The pace of acquisitions takes account of the economic environment. In this regard, Legrand maintains a disciplined financial approach, based on a multi-criteria assessment and uses, in particular, an assessment matrix that enables it to ensure that the acquisitions W boost its presence in markets with high growth potential; and W are carried out on average, in compliance with its fiancial criteria, which primarily include: W an acquisition price corresponding to the usual valuation multiples compared with those applied to companies in the same sector or the same markets, W a positive impact on net income from the first year of full consolidation, W a value creation target (return on invested capital higher than the weighted average cost of capital) after three to five years. complement the Group’s business activities: W increase its local market share; and/or W broaden its range of products; and/or

W innovative marketing and sales tools that complement the numerous showrooms which the Group has had for years all over the world. Since 2011, Legrand has used concept stores such as “Lab by Legrand” in Paris to showcase the Group’s premium user interface ranges, “B Inspired” in Brussels, or the “Experience Center” in West Hartford in the United States. Legrand continues to break new ground in terms of the services it offers its customers, for example by opening “Project Stores” in France and in India in recent years. This concept gives customers an opportunity to explore the Group’s offerings in a connected and interactive showroom, and provides training in the installation of Legrand solutions. R 2.2.2.2 GROWTH BYACQUISITION IN AMARKET OFFERING A LARGE NUMBER OF EXTERNAL GROWTH OPPORTUNITIES In the long term, Legrand plans to continue to make “bolt-on (1) ” acquisitions of companies with leading positions in their market, thereby continuing to develop market share and drive growth. Given the fragmented nature of the market in which it operates, the Group focuses on acquiring small- and mid-size companies. 2.2.2.2.1 A fragmented market The market accessible to the Group, which Legrand values at more than €100 billion compared with around €60 billion in 2007, remains highly fragmented. Indeed, around 50% of global sales are generated by small- and mid-size companies, which are often local and typically enjoy only a marginal share of the global market.With an accessible global market share of over 5% in 2017, Legrand is one of the market benchmarks. Market fragmentation is due in part to differences in standards and applicable technical norms, to end-users’ habits in each country, as well as the wide variety of product offerings required to provide a building with electrical and digital infrastructure. Attempts to harmonize standards to make products usable on a very large scale have failed, especially within the European Union, due primarily to the size of the investment required to replace existing electrical networks for only limited added-value. As a result, a significant portion of the electrical and digital building infrastructure product and system market has traditionally remained in the hands of small local manufacturers, the potential acquisition of which may represent a growth opportunity for Legrand.

(1) Companies that complement the Group’s business activities.

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REGISTRATION DOCUMENT 2017 - LEGRAND