M&A Investment Evaluation, Due Diligence, and PMI Execution Risks
First written in FY2024-Q3. 1 of 3 entries say "Materialised", first in FY2024. Latest entry: FY2025.
The whole theme swung hardest in 2024: 36 of 89 companies on the "Worse" side.
- FY2025WorsenedAnnual report
「When acquiring the shares of Partners Information Technology, Inc., the Company’s consolidated subsidiary, the Company recognized goodwill based on expected excess earning power. As performance fell below the business plan initially projected, the Company conservatively revised the business plan and decided to expense the entire unamortized goodwill balance in a single charge. The resulting reduction in goodwill was ¥138 million, which was recorded as an impairment loss under extraordinary losses for the consolidated fiscal year.」
Following the ¥1,007 million impairment loss recorded in the previous fiscal year for Partners Information Technology, Inc., the remaining ¥138 million of goodwill was fully impaired, and the risk of underperformance after the M&A investment continued to materialize as a loss. - FY2024MaterialisedAnnual report
「When acquiring the shares of Partners Information Technology, Inc., the Company’s consolidated subsidiary, the Company recognized goodwill based on expected excess earning power. As performance fell below the business plan initially projected, the Company conservatively revised the business plan and determined that ¥1,007 million of the unamortized goodwill balance should be impaired. The amount was recorded as an impairment loss under extraordinary losses for the consolidated fiscal year.」
Performance after the M&A investment fell below the initial plan, and an impairment loss of ¥1,007 million was recorded on goodwill related to Partners Information Technology, Inc. The business-operation risks associated with evaluating and integrating the M&A investment materialized as an actual loss. - FY2024-Q3First statedAnnual report
「The Group invests in companies in Japan and overseas when it expects to create synergies and generate future returns on investment, on the premise that the investee can complement the Group’s business strategy by providing access to new technologies, solutions and development resources, or by expanding into new business areas. When making investment decisions for M&A, the Group considers evaluations of investment returns and valuation results calculated by external parties using the DCF and multiples methods. It also requires due diligence by external experts, including financial advisers, certified public accountants and attorneys. The management meeting deliberates on each identified risk, taking into account proposed responses and other matters, and the Board of Directors ultimately makes the decision and grants approval. In addition, the Group prepares a post-M&A integration process (PMI) plan and works to reduce risks by beginning the integration process at an early stage to maximize the benefits of the M&A.」
For M&A, the company has newly disclosed evaluation based on investment returns, the DCF method and the multiples method, due diligence by external experts, deliberation and approval by the management meeting and Board of Directors, and a PMI plan and early integration as risk-reduction measures.