Acquiring Germany’s EPCOS to complete the passive-component and sensor portfolio (2008)

The complementarity bet, and what came after

The core of this decision was the idea of filling, by buying a world-leading firm outright, a gap that in-house materials development could not close quickly. High-frequency parts, sensors, automotive modules and a European sales channel were all long-standing weaknesses of TDK’s, and EPCOS supplied them almost exactly, with little to spare and little missing. Even at a scale that emptied the cash on hand, the overlap between the two businesses was small and the complementarity high — on that single point, the acquisition was rather less speculative than the phrase “betting the company” implies. This was a materials maker committing several times its usual capital in one stroke, in order to cover its own weaknesses from outside.

Integrating an acquired business and earning money from it are, however, separate problems. The Lehman shock that arrived immediately afterwards forced heavy losses, and it took time before the results of integration showed in the figures. Even so, the direction itself — moving the centre of gravity to passive components and sensors — never wavered, and as automotive and smartphone demand expanded, the technology and channels that came with EPCOS were gradually put to work. It is best understood as a case in which one large acquisition redrew the outline of the business and laid the ground for the following decade and a half of growth.