SoftBank buys Vodafone Japan — a ¥1.75 trillion LBO, the largest in the country (2006)

The pattern of buying time

At the centre of this decision is that SoftBank, already holding the licence that is the ticket to entry, treated the time it would take to build from zero as itself a cost. Base stations, spectrum, fifteen million subscribers, a sales network — assets that would have taken years to assemble alone were obtained in a single transaction. The LBO structure, moving a ¥1.75 trillion company on ¥200 billion of its own equity, was a landmark in Japanese M&A; but it worked only because of the nature of a mobile business that keeps generating stable cash flow even while losing share. A price widely called impossible to recover was a level that could be justified only on the assumption that the buyer could actually execute a turnaround.

Looking back from the 9434 page as it stands today, this acquisition was also the moment ownership of the company passed from British to Japanese capital. Foreign money that had landed in Japan as one corner of a global strategy withdrew, and a domestic challenger took the assets over and revived them — the mirror image of the 2001 takeover. That net additions swung to first place within a year of the purchase shows that the same assets change in value according to the will of the management running them. How far a decision to “buy time” can be permitted in an industry as capital-intensive as telecommunications: for thinking about the conditions that justify an enormous price and enormous borrowings, this case remains a reference point.