Buying air-cargo and electronics logistics subsidiaries in sequence (2012)

Fast to absorb, slow to bind together

To read this run of acquisitions as no more than a chase for scale is to miss what kind of decision it was. What Mitsui-Soko chose between 2010 and 2012 was not expansion by stacking up its own sites, but taking over manufacturers’ logistics subsidiaries together with the base beneath them. It bought JTB’s air-cargo subsidiary for $58.9M (¥5bn) and Sanyo Electric’s logistics arm for $303.3M (¥24bn), acquiring at a stroke both the customers and the functions of air forwarding and electronics 3PL. Buying time with money, and assembling the full breadth of an integrated logistics company in a few years, is where the core of this judgement appears to lie.

The speed of absorbing a base, however, was not matched by the speed of binding it into profit. The goodwill added on top of the purchase price was heavy in exact proportion to how highly the acquired shippers’ future earnings had been valued, and the error in that estimate came back as impairment of $226.5M (¥25bn) in the year to March 2017. The net loss of $208.6M (¥23bn) and the change of president the following year look like the price of integration failing to keep pace with acquisition. An acquisition is only the entrance to a wider business; whether this kind of expansion succeeds turns on how the absorbed base is bound back into operations that pay.