Buying Koroseal, and leaving the pure wholesaler behind (2016)

Choosing to give up stable earnings

The weight of this acquisition lies less in its price than in the fact that it deliberately unsettled a high-margin model that already worked at home. The stability of holding half the domestic wallpaper market was inseparable from a ceiling on growth. Sangetsu went after an unknown market — non-residential interiors in North America — and accepted several years of losses as the price. Stepping into a choice that efficiency and stability would counsel against is where the seriousness of the phrase “leaving the pure wholesaler behind” can be read.

That said, the acquired business did not bear fruit quickly. Goodwill impairment, years of red ink, and a change of local management before it reached the entrance to profitability — the sequence mirrors the difficulty of overseas M&A exactly. A wholesaling system that worked in Japan does not necessarily function abroad as it stands; a six-year rebuild demonstrated that reality. Whether the North American business grows into a structure that lifts group profit remains the next question.