Risk of Failure to Realize Investment Benefits from M&A and Business Alliances and Goodwill Impairment

「During the interim consolidated accounting period, there were no material changes or new developments from the descriptions in the securities report for the previous fiscal year.」

「When undertaking M&A or business alliances, the company carefully assesses market trends, synergies with the group and potential risks at the target company, making use of research by external lawyers, financial advisers and other experts, while using WACC as the hurdle rate to determine whether a transaction will contribute to increasing corporate value after the strategic investment. Following the implementation of M&A and other transactions, it monitors the progress of the business plan considered during the transaction review stage and the extent to which synergies have been realized.」

「During the interim consolidated accounting period, there were no material changes or new developments from the descriptions in the securities report for the previous fiscal year.」

「During the consolidated fiscal year, as the excess earning power initially anticipated could no longer be expected, the carrying amount was reduced and the decrease was recorded under other non-operating expenses. The recoverable amount was measured based on the net selling price.」

「When undertaking M&A or business alliances, the company seeks to minimize risks by examining the outlook for future market trends and synergies with the group, and conducting detailed due diligence on the target company's financial condition, legal matters and other areas. Following the implementation of M&A and other transactions, it will further strengthen monitoring efforts, including the progress of the business plan considered during the transaction review stage and the extent to which synergies have been realized.」

「The Group recognizes M&A and business alliances as important and effective strategies for expanding its business. However, if we cannot identify effective investment opportunities or fail to achieve the benefits initially expected, the Group's business results could be affected. If changes in the business environment or competitive conditions after an acquisition hinder execution of the original business plan and the plan does not proceed as expected, losses including impairment losses on the related goodwill could arise and affect the Group's business results. Because the excess earning power initially anticipated was no longer expected to be achieved, we reduced the carrying amount and recognized the reduction as an extraordinary loss. Goodwill impairment loss: ¥4,473 million.」