Assembling a portfolio out of medicine, seniors and agriculture (2013)

Not the batting average, but the one hit

The companies Noritsu Koki took in between 2009 and 2017 — medical consulting, magazines, mail order, fresh vegetables, regenerative medicine, biotech, medical information, small-amount insurance, pen tips — do not cohere as a list of industries. It is a composition whose synergies are hard to explain, and one that increases the burden of management. That the buying continued anyway appears to reflect the experience of a market for photo processing equipment that vanished: the company chose not to return to a form that depends on a single business.

This way of buying can only be scored on the distribution, not the average. Most of the companies acquired were out of the group within a few years, and most of the profit that remained came from a single one, the Japan Medical Data Center. It is hard to believe the board of 2013 foresaw a course in which 33% of the shares of a company valued at around ¥2bn would sell for ¥111.8bn. The actual design of those four years of acquisitions was not raising the probability of a hit, but never running out of the cash needed to hold on until one arrived.