Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY1963 · unconsolidated
Revenue$2M
Net income—
Net margin—
→
FY2010 · consolidated
Revenue$3.6B
Net income$464M
Net margin12.9%
From 1971 Terumo placed its own companies in Europe and the United States, and in 1974 changed its name to match what the business had already become. The decisive move came in 1999, when it bought 3M's heart-lung business outright: from that point, buying a treatment area rather than developing one became a standing method, and within a decade catheters, neurovascular devices and prosthetic heart valves had all been added the same way.
A change of name that ratified what the business had become
In May 1971 Terumo Europe NV was established in Belgium, and in October of the same year Kimble Terumo in the United States, giving Terumo footholds in the European and American markets at once. Choosing local subsidiaries over exports was early for a mid-sized Japanese manufacturer of the day, but disposable medical instruments are bound by each country's pharmaceutical regulation, sterilisation standards and logistics, so selling and securing conformity on the ground was indispensable. Europe was covered from Belgium and the United States through the joint venture with Kimble — a local base placed in each principal market. In October 1974 the company changed its name to Terumo Corporation. The old name, which announced thermometers and nothing else, had come adrift from what the business was, and the change of name was a declaration of the turn towards a full-line medical device maker.
At home the Kofu plant opened in 1983, the research and development centre in 1989 and the Suruga plant in 1991, one after another, putting production and research bases in place. In May 1985 the listing was moved up to the First Section of the Tokyo Stock Exchange, giving the company the capacity to raise money in the capital markets. In the course of the passage from thermometer maker to medical device maker, three foundations — plant, listing and overseas bases — were put in place at the same time, and that became the precondition for the overseas acquisitions of the next stage. No one of them could on its own have carried the money and the executing strength an acquisition demands, and the fact that the three came together only in the second half of the 1990s is one reason the 3M deal of 1999 had to wait that long. A period of stacking up, in order, the elements that expansion required ran to this point.
Buying 3M's heart-lung business — stepping into cardiovascular
In June 1999, Terumo bought the cardiopulmonary bypass business from 3M of the United States and established Terumo Cardiovascular Systems. Before the purchase, Terumo was centred on general-purpose disposables such as infusion sets and syringes, and had not entered cardiovascular at all. A field as difficult and as high-value as the heart-lung machine is one where building up research, clinical trials and regulatory work in-house takes time measured in decades and a large sum of money. Emerging as 3M pressed on with tidying its healthcare businesses, this deal gave Terumo the opportunity to acquire in one movement a treatment area that its own development could not reach. The cardiovascular business would later, combined with interventional products such as catheters, become the base from which a leading company of the group grew.
Entering the 2000s, Terumo raised both the frequency and the size of its acquisitions. It took Vascutek of Britain in 2002, Mission Medical of the United States in 2005 and MicroVention of the United States (cerebrovascular treatment devices) in March 2006, and in 2007 took over the prosthetic heart valve business from Kohler コーラー社 of Germany. Catheters, cerebrovascular devices, prosthetic heart valves — all lay in treatment devices rather than on the old disposables line, and a pattern took shape of buying in, piece by piece, the fields in-house development could not reach. MicroVention would later become the core of the neurovascular area and, together with the purchase of Sequent Medical in 2016, grew into a driver of growth. Beginning from the 3M purchase of 1999, Terumo made buying businesses and connecting them a normal instrument of management.
CaridianBCT establishes a blood systems business
In April 2011, Terumo acquired CaridianBCT of the United States, a leader in blood component collection and processing. The price was among the largest Terumo had ever paid, and the deal came with a temporary fall in the equity ratio. Taking CaridianBCT allowed Terumo to make its transfusion and blood-related product range into an independent company, the blood systems business, completing a structure of three treatment areas alongside hospital and cardiovascular. It was the point at which the very scale of its acquisitions changed — from a method of filling in areas with individual purchases to one of taking an adjacent field of the existing business whole. A company that had begun with a single thermometer rebuilt its business portfolio into one holding three treatment areas — cardiovascular, blood and plasma, and hospital — and this purchase is where that happened.
Integration after the purchase was not easy. Segment figures for FY11 show the blood systems business running at a low level, $43.9M (¥4bn) of profit on sales of $900M (¥72bn), and there were periods when it turned to loss — a loss of $11.6M (¥1bn) in FY15 and of $26.6M (¥3bn) in FY16. Building a structure of three areas and earning a profit in those areas are separate problems. The burden of goodwill amortisation, the cost of integrating local organisations, the tidying of product lines, the rebuilding of sales structures market by market — these came together, and the integration burden exceeded what had been assumed when the deal was announced. Profit recovered to the ¥15bn level after the move to IFRS in 2017, but the fact that making the blood business pay took close to ten years shows that M&A does not produce results at once.