Buying Toll: the move into international logistics, and the write-off (2015)

The price of buying growth

Looking back at this acquisition, one sees an overseas deal — the kind that buys time with money — exposing the buyer’s lack of preparation without mercy. Facing the hard fact of a shrinking domestic mail business, and with a listing ahead of it, Japan Post went looking outside for a picture of growth. Swallowing a major Australian logistics group whole appeared to erect a new pillar beside a mature core. But a business value premised on the tailwind of a resources boom collapsed as soon as the boom passed. The $5.1B (¥620bn) price looks to have had the impatience of the buyer priced into it.

It is also hard to deny that the deadline of the listing — the deal was the showpiece — removed any room to weigh the acquisition slowly. Committing to an enormous M&A in a matter of months, impairing it the next year, and selling the business six years later for roughly $6.4M (¥700m) suggests how heavy the cost of prioritizing the appearance of a growth story can be. That a company should look for growth beyond a mature business is natural enough, and overseas M&A is a powerful way to do it. Even so, if scale is pursued without asking how far one can judge the value of the target under one’s own power, an acquisition becomes not an engine of growth but a source of loss. The Toll deal wrote that lesson into the history of a privatized company.