Bilbrough had a reputation for growing companies, and the private equity firm that owned 70 percent of Juno Lighting was looking for someone who could take the company to the next level. Under his leadership, Juno grew steadily, but the constant threat of the sale of the company loomed over the heads of Bilbrough, his employees and his customers.
“Private equity investments almost always have a limited timeframe,” says Bilbrough. “(They) generally resell a company that they buy to give liquidity back to their investors. So it was inevitable from the time I joined the company that eventually there would be a sale of the company. It was really a matter of deciding when was the right time.”
The right time turned out to be the summer of 2005. The right buyer was Schneider Electric.
Despite the acquisition, Juno has maintained its individual identity while reaping the benefits of its $13 billion parent company.
Smart Business spoke with Bilbrough about the acquisition process and how being acquired has benefited the company.
How did you know it was the right time to sell Juno?
We had generated enormous sales growth, as well as profit growth, over the last three or four years. The company was doing extremely well.
The current shareholders were going to receive a lot of rewards, in the sense that the company had really grown both sales and profits and we had taken a lot of market share. The board could see that there was still a lot of runway left in that.
We weren’t necessarily talking about selling the company at some peak that wasn’t sustainable. In fact, the board concluded that it looked like we would have several more years of that kind of growth. To a buyer, that is attractive. Ideally, if you want to get maximum value for your exiting shareholders, you want to sell the company at a time when new buyers can still see the good times continuing.
Our industry had been doing well for the past few years, but looked like it had a lot of upside left in it. The lighting industry went through a bit of a downturn after the 9/11 attacks. Commercial construction really went into a slump.
More than half of our business comes from the commercial construction side of things. The other slightly less than half comes from residential construction. The lighting industry looked like the residential market would stay relatively healthy, and the commercial construction market looked like it was coming out of a trough and [would] be good for the next five years or more.
The final factor was that the market for selling companies in 2005 was as hot as it has been in a long time. There were more buyers chasing good companies than there were good companies to buy. If your board looks at those three scenarios, that is about as good a time to sell the company as you could ever see.
How did you choose the right buyer?
We could have sold the private equity firm’s stake back to the public and gone back to being a fully publicly traded company, or we could sell to a strategic buyer, like Schneider Electric was, or we could sell to another financial buyer, which is what private equity firms are referred to.
We pretty much did an open auction of the company. Our board hired an investment banking firm and they put a marketing plan together and took the company’s story out to financial buyers [and] to strategic buyers who might be interested. The investment bank also reviewed the option of selling the company to the public and decided that the opportunity would always exist if the other avenues didn’t pan out to our shareholders’ satisfaction, but there seemed to be a lot of demand for Juno among strategic buyers and financial buyers.
Many people were interested, and we received many attractive offers for the company. Because we had a publicly traded stub of ownership, we were bound by all the FCC and NASDAQ regulations.
There’s a set of rules and laws that are referred to as the Revlon Duties of a board. The Revlon Duties of a publicly traded board are they have to sell the company to the highest bidder, no matter what. Schneider Electric was the highest bidder for the company.
How has being acquired benefited Juno Lighting?
The fact that somebody owns us, other than the private equity firm, is beneficial because all of our employees have known all along that because we were controlled by a private equity firm, the company would eventually be sold. Not only did all of our employees know that, but all of our customers knew that, all of our suppliers knew that, and that always left an air of uncertainty around the company.
We did terrific despite that, but when we were trying to recruit new people, one of their concerns always was ‘Well, this is fine now, but we know you are going to be sold, and I don’t know who the new buyer is going to be, and therefore, I don’t know who I am going to be working for.’
And our current employees were always worried about what was going to happen when the company sold, and our customers would always worry a little bit.
One good thing about this happening is it eliminated all of that uncertainty. Now our employees know who they work for and who they are going to be working for. Our customers know who we are owned by and that we are not going to change hands again.
Schneider is a very attractive purchaser to our customers because they are so highly thought of worldwide. They are a major worldwide company over $13 billion in sales. Their biggest business in the U.S. is Square D, which, in the electrical industry, is a very famous brand and a very large business.
There are real synergies between us and Schneider Electric because of the fact that their whole business is electrical products and all of their products are sold through the same channels and distribution that we sell through. We are now part of a much bigger force within our distribution channels and a much bigger force within the electrical products industry.
That makes us more important to our customers.
HOW TO REACH: Juno Lighting, www.junolighting.com