Making a system of acquisition: SHIFT Growth Capital (2022)

What systematized buying earns, and what it owes

At the core of this decision was the idea of not entrusting acquisition to one person's eye but converting it into a repeatable organizational capability. In software testing, its founding trade, SHIFT had made a system of mass hiring and rapid deployment by rendering testers' abilities visible. The templating of M&A and PMI through SHIFT Growth Capital can be seen as applying that same backbone of standardization to the buying of companies. By cutting the selection criteria in numbers and preparing the sequence of integration, acquisition came closer to a task that could be run several times a year. That a listed company could stack up as many deals as any in Japan was the fruit of that systematization.

Yet making a system of acquisition also means carrying goodwill as a standing liability. The goodwill balance accumulated, and a considerable part of the growth in results came to depend on acquisition effects. The better the system runs the more deals it makes, and the more deals it makes the more the precision of selection is tested — the sustainability of the strategy rests on whether SHIFT can keep choosing deals that stay in the black even after goodwill amortization. How far a company that grew under its own power on the standardization of testing can hold that discipline once buying sits at the centre of growth is still at the stage of being watched.