Schneider Electric’s acquisition of Pelco

Schneider Electric's acquisition of Pelco. It was quite a surprise to the industry when the big player in building automation, Schneider Electric, announced the acquisition of Pelco in August last year. Normally directly after such a merger people tend to look at the product portfolios of the two merging partners and discuss business opportunities. In the case of Schneider Electric and Pelco, thoughts about a possible “clash of cultures” dominated the discussions in the first weeks after the announcement of the merger. On one side of the Atlantic the US company Pelco, proud of its tradition and its commitment for new-found patriotism after the events of 11 September, and on the other side a French company whose name was not known by many in the security industry.

Some facts were clear from the beginning: Schneider Electric has acquired all shares of Pelco for a total of US$ 1,540 million with the latter reporting to Schneider Electric’s Building Automation business unit TAC and taking the leadership of TAC’s present Fire & Security Product Division.

Meanwhile, the integration into TAC is on its way and the promotion of Dean Meyer, its former president for the Americas, to Pelco’s president and CEO was a logical step. Meyer will report directly to Arne Frank, chairman and CEO of TAC worldwide. In an interview, Dean Meyer explains at what stage the integration of Pelco is.

It will be crucial for the Pelco people how smooth the integration will happen in the next months and it will be a constant challenge for Dean Meyer and his team to take advantage of the possible synergies the merger offers and to protect the strength that made Pelco successful in the 20 years under David McDonald‘s guidance.

Being fanatically customer driven has always been an integral part of every Pelco job description. Dean Meyer is well aware of the fears to lose part of this strength when he states that: “It is equally important to protect those things that have made Pelco so successful in its own right, namely the customer service model, the community outreach, the employee empowerment. So I am very sensitised to the blend of shareholder accountability and the entrepreneurial core values that Pelco has.”

The Synergies from a Building Automation Point of View

With the acquisition of Pelco, Schneider Electric significantly reinforces the offering of its Building Automation business, which encompasses power and HVAC control, electronic security and fire safety, and increases its ability to provide integrated solutions. Through Pelco’s experience in video security Schneider Electric is one step further to become a total solution provider. The acquisition strengthens its already existing security platform with sales of € 155 million in 2006.

The former acquisitions of TAC, Andover Controls and Invensys Building Systems, have already enabled Schneider Electric group to become a major player in that business. But it was not only to rebalance its portfolio that motivated Schneider Electric to acquire Pelco. Video security is the most attractive segment of the security industry. Its shifting from pure analogue communication protocols to more high value-added IP protocol and softwarebased solutions complements security systems such as intruder detection, fire alarm or access control.

The IP world is one Schneider Electric is very familiar with and that can help Pelco a lot. A first result of the integration is the IP-based Intelli-M Access Control System, which Pelco introduced in February, “bringing together the power of security integration with Pelco’s services and Customer Satisfaction Guarantee,” as they state in a recent press release.

For Schneider Electric, Pelco seems to be the best possible fit to expand because it is a leader in the fast growing video security industry with a high brand recognition. The very solid track record of above industry growth with a CAGR of 21% over the period 1997–2006 and sales of US$ 506 million in 2006 surely were strong arguments for the new partner.

Additionally, Schneider Electric expects sales synergies through the sale of video solutions into TAC channels and Pelco and TAC integrated access and video solutions. Cost synergies of about US$ 32 million through better purchasing conditions, optimisation of back office and operating efficiencies are expected.

Heiko Baumgartner