Acquiring Australia’s Programmed Maintenance Services outright (2017)

On buying the size of a market

On paper the logic of this acquisition leaves little room for objection. The largest market in Asia-Pacific is Australia, and buying the leading company in that market whole puts you near the top faster than building sites one at a time. Consolidated sales did in fact grow from ¥592.0 billion to ¥925.8 billion in two years, closing on the target of ¥300 billion in overseas revenue. But the size of a market and the profit one’s own company can earn in it are different quantities. That Australia’s staffing market is the largest in the region does not mean the company bought there will run at Japanese levels of profitability. The reason given for the impairment was a single line: the earnings that had been assumed could no longer be expected.

The other thing that remains is the question of where to place a facilities-maintenance business. At the time of the acquisition Programmed drew sixty percent of its EBITA from Maintenance; it was an infrastructure contractor as much as a staffing company. Measured on the yardstick of human-resources services this is an alien business, and it has been kept inside the human-resources segment to this day. That the 有価証券報告書 went on to state a lower priority for large overseas acquisitions, and that an investment committee was established, reads as remorse over the size of the sum and, at the same time, as a re-examination of how far the company had looked into what it was buying.