Merging with Ando to form Hazama Ando (2012)

What it means to make civil and building one company

Read this merger through the words “merger of equals” and “best partner” alone and you miss its core. At the centre is a second-tier contractor blocked by a wall of scale in a shrinking domestic market, joining a partner whose strengths lay elsewhere — civil engineering at Hazama, building at Ando — to secure breadth of orders and size of business. In a market where construction investment had halved from ¥80tn in 1996 to ¥41tn in 2010, Hazama had been through two financial rescues and a corporate split and was still stuck at ¥197.9bn. The merger can be read as the securing of scale, on the same line as the rehabilitation it had pursued alone.

Yet adding two companies’ figures together is not the same as earning as one company. After it began, Hazama Ando grew to ¥407.9bn of sales and ¥37.0bn of operating profit by FY2016 by eliminating duplicated head-office functions, while the polarization of margins — 20.1% in civil against 5.5% in building — remained. The substance of the integration was handed on to the five years of groundwork under the first president, Nomura, and then to the rebuilding of the building business under Fukutomi Masato. What the merger delivered was not an end point but the starting point for constructing an organization that can earn while holding two different companies together.