The full mining lineup: acquiring America’s Joy Global (2016)

Two pillars — construction and mining equipment

At the centre of this acquisition was a sense of timing: to buy into a domain it did not hold precisely at the trough of the resource cycle. Demand for mining equipment swings with resource prices, and when the market runs high, acquisition prices swell with it. To commit about $2.8B (¥300bn) at a time when the market had sunk and Joy Global’s sales were below the prior year carried the colour of a contrarian bet — buying with the trough of demand priced in. The aim — assembling all at once the ultra-large machines it had lacked and standing on the same ground as Caterpillar — showed up, for the time being, in results once the market recovered.

That said, taking on mining equipment whole was also a choice to hold, alongside construction equipment, a business that swings in step with resource prices. How to divide limited capital and managerial attention between the two pillars of construction and mining equipment, and how to smooth the troughs and peaks of the market, remains a question even after the full lineup was achieved. Seen together with the move to raise the weight of parts and services to soften the market’s swings, absorbing Joy Global brought Komatsu two sides at once — an expansion of scale and a widening of the swing in earnings.