Risks of Failure to Achieve M&A Synergies and Performance Deterioration Following Acquisition

「During the current consolidated fiscal year, the company acquired all shares of アイエススプリンクラー株式会社 and コーベックス株式会社 and made them consolidated subsidiaries. Goodwill arising from these business combinations was recognized as the excess earning power expected from the existing businesses through future business development, representing the difference between the acquisition cost and the fair value at the acquisition date of the identifiable assets and liabilities of the acquirees. As of the end of the current consolidated fiscal year, the identification of identifiable assets and liabilities and the measurement of their fair values were not complete, and the allocation of the acquisition cost had not been completed. Accordingly, provisional accounting was applied based on reasonable information and other data available at that time.」

「The purchase price was agreed after financial, tax, legal and labor due diligence and consideration of a valuation based on objective and reasonable valuation methods.」

「When conducting M&A, the company seeks to reduce various risks by conducting due diligence on the target company’s financial position, contractual relationships and other matters, including advice from external experts such as certified public accountants.」

「In expanding the business through M&A, the Group may fail to obtain the synergies, business expansion and other benefits initially anticipated. In addition, new business areas may bring business-specific risk factors through the M&A. These factors, together with deteriorating performance after a company becomes a subsidiary and the amortization or impairment of goodwill, may affect the Group’s operating results and financial position.」