Creating IT Holdings by joint share transfer with Intec Holdings (2007)

What being equals cost

What stands out in this combination is that it went after scale while choosing a form in which neither side became the other’s subsidiary. Creating a new holding company and setting both firms beneath it is procedurally heavier than an acquisition, and it leaves a double layer in place afterwards. In practice the rearranging went on for years after the launch — dissolving the intermediate holding company, shifting nine subsidiaries, merging the operating companies — and it took eight years to become a single operating company. The “pride of an independent” that President Okamoto spoke of can be read as what that effort and that time were paid for.

On the other side of the motive for scale lay a bitter recent experience. For a company of a size where the delay of one large project reverses the year’s results, the bigger the project the higher the stakes of the wager. Even taking at face value the explanation of the day that the combination had nothing to do with the JCB project, the task itself — building a body able to withstand ever-larger contracts — remains. Scale dilutes the effect of failure; it does not reduce failure. The question the 2007 choice answered, and the question it did not, would be returned to with every medium-term plan that followed.