M&A

Outsourcing Inc to undergo Bain backed MBO

According to the Nikkei, Japanese human resources service company Outsourcing aims to take its shares private through a management buyout with Bain Capital, which will likely exceed 200 billion yen ($1.3 billion). It seems that rapid expansion through M&A has made the group difficult to manage. Outsourcing is currently listed on the Tokyo Prime market, and it may be that the increasing demands of maintaining this status have become too onerous.* Several other listed Japanese companies have undergone MBOs recently, such as Benesse, Taisho Pharmaceuticals and Sidax.

The Japanese version of the Nikkei report says that Outsourcing had 230 consolidated subsidiaries as of September 2022. As the number of companies within the group increased, the cost of maintaining the company’s listing increased, including the time-consuming task of preparing consolidated financial statements. In 2021, inappropriate accounting was discovered at 17 group companies. Outsourcing intends to use Bain to proceed with post merger integration, including the consolidation and abolition of group companies and strengthening corporate governance.

Of the 110,000 employees, 58.8% are overseas. We estimate around 1,200 of those employees are in the UK, and 5,000 or more are in the EMEA region. It is hard to estimate accurately as so many employees are despatched employees rather than core administrative and management staff and each country treats the status of outsourced employees differently. Outsourcing has not updated its fact sheets or fact books in English for several years, which is perhaps a reflection of the complexity they now face. The website features rather a lot of photos of the founder, Doi Haruhiko with the late Queen Elizabeth II , due to Outsourcing’s sponsorship of the Royal Windsor polo match.

The board of directors used to reflect two of Outsourcing’s biggest acquisitions in Europe, CPL Resources and Otto Holdings. Irish born Anne Heraty from CPL still seems to be on the board but Franciscus van Gool from Otto seems to have resigned.

*UPDATE

On 20th December 2023, the Tokyo Stock Exchange requested Outsourcing Inc to submit an Improvement Status Report with regard to the status of implementation and operation of the improvement measures, having found that multiple companies in the group made inappropriate applications for employment adjustment subsidies (the Japanese equivalent of the furlough scheme used in various countries during the pandemic) at the same time.

For more content like this, subscribe to the free Rudlin Consulting Newsletter. 最新の在欧日系企業の状況については無料の月刊Rudlin Consulting ニューズレターにご登録ください。

Japan’s NTT Data acquires UK Sapphire Systems

NTT DATA Business Solutions AG, the German subsidiary of NTT DATA has acquired Sapphire, a UK-headquartered provider of digital operations software and services to primarily mid-market customers in the US and UK markets. This will strengthen NTT Data’s capabilities in SAP cloud and digital related services.

Sapphire has over 400 employees in 8 countries, with 168 in the UK. It also has offices in the USA, Argentina, Mexico, Lebanon and India.

This is the latest in a long series of NTT Data acquisitions around the world, including Everis in Spain (2014), MagenTys (UK, 2018), itelligence (Germany, 2013) and Dell’s services business (2016). The NTT group has nearly 37,000 employees across Europe, Middle East and Africa, making it the fourth largest Japanese employer in the region.

Daiwa Securities group acquires Irish M&A advisory IBI Corporate Finance

Daiwa Securities has added another acquisition to its European network of corporate advisory firms by acquiring IBI Corporate Finance for over 10 million euros. This will add 28 employees to the 300 or so based in Europe. More than half of the European employees are based in London and Manchester, building on the acquisition of Close Brothers in 2009. Recent acquisitions have been elsewhere in Europe such as Montalban in Spain in 2019.

IBI provides M&A advice across sectors including finance, health care and infrastructure, centering on on small- to mid-cap M&As worth less than $500 million.

Fuyo General Lease to set up UK renewable energy investment subsidiary

Fuyo General Lease is setting up a subsidiary in the UK from April 2024 to invest in renewable energy, particularly offshore wind. It entered the European renewable energy business in June 2022, and in about a year and a half, the total amount of investment and loans exceeded 50 billion yen in Japanese yen. The company will also invest approximately 30 million euros (approximately 4.7 billion yen) in a fund managed by Danish investment company Copenhagen Infrastructure Partners (CIP).

Fuyo General Lease already has subsidiaries in the UK and Ireland focused on aircraft leasing and acquired British company Aircraft Leasing and Management in 2014. Other Japanese leasing companies such as Orix have already been expanding in Europe – Orix acquired Spanish renewables company Elawan Energy in 2020.

Nisshinbo divests TMD Friction

Nisshinbo has sold its 2011 acquisition, automotive brake component manufacturer TMD Friction to AEQUITA, a private equity firm based in Munich, Germany. TMD Friction is headquartered in Luxembourg, with European production in Germany, Spain, UK, Romania and France. It had already restructured its UK operations, shutting down production in Kilmarnock in 2019 and more recently investing in new machinery for its Hartlepool plant. It employs around 2,237 people in the European region, with 670 in the UK, 577 in Romania, 437 in Germany, 300 in Luxembourg and 150 in France, and a further 2,000 in the USA, Mexico, Brazil, China and Japan. The transaction is expected to be completed in Q4 of 2023, subject to approval by the relevant authorities.

Sakata acquires Dutch company Sana Seeds

Sakata Vegetables Europe, headquartered in France, has acquired the Dutch cucumber company Sana Seeds. Sakata has acquired several companies across Europe over the past few decades – Samuel Yates in the UK in 1996, a seed company in South Africa in 1999, a flower company in Denmark in 2003, a gerbera company in the Netherlands in 2008 and a cucumber company in Jordan in 2017. It also has operations in Spain, employing over 200 people in the region in total.

Hitachi Rail – the challenge of not being too dependent on Britain

According an interview with Nikkei Business with Alistair Dormer, Representative Executive Officer for Hitachi’s main board and EVP for the Green Energy & Mobility Sector Strategy Planning Division, Hitachi faced two main challenges in its rail business in Europe. Firstly that they were not so strong in control and signal systems, particularly as standards were quite different between Japan and Europe. Secondly, they were too dependent on Britain. For those reasons, it made good sense to acquire Italy’s Ansaldo.

Dormer is himself British – he was in the Royal Navy, before working for Alstom UK and then joining Hitachi Rail in 2003, becoming Managing Director of Hitachi Rail Europe in 2005 and then Global CEO of Rail in 2014. He had already risen to board level at Hitachi by 2015, but took a break in 2022 for family reasons. He was been re-appointed as Representative Executive Officer and Executive Vice President, in January 2023, as well as chair of Hitachi Europe and Hitachi Energy.

The acquirer needs to have the mindset that they are the ones who will change

He has some wise words to say about the post merger integration with Ansaldo. Ansaldo, like Hitachi, had over 100 years of history and a strong culture. “After an acquisition, the acquirer may think about changing the other party’s corporate culture, but this is extremely difficult. Rather, I think the acquirer needs to have the mindset that they are the ones who will change.”

Hitachi Rail created a management team with 30% Japanese, 30% British, and 30% Italian. Additionally, executives from Ansaldo were appointed to Hitachi’s board of directors. Giuseppe Marino, the current CEO of Hitachi Rail, is a former Ansaldo employee.

“When a company is acquired by another company, employees become anxious. Will I be able to continue working? Will the parent company do something strange? Will this factory be closed? Rules must be clearly set,” says Dormer.

Loss of decision making power could shut down the business

“When acquiring a company, you may take away all decision-making rights from the other company. As a result, the acquirer becomes dissatisfied, loses decision-making power, everything slows down, management and employees become dissatisfied, and customers become dissatisfied.” Unlike many previous Japanese acquisitions, where the acquired company was left to carry on as before, the brand name and uniform were changed to Hitachi on day one. Hitachi signs were posted at all factories, and Hitachi’s values were posted on bulletin boards.

“Because Hitachi was not used to developing business in Europe, it instructed Ansaldo to seek permission for even the most trivial details. This would have shut down the business.” So Dormer suggested to the CEO Nakanishi that Ansaldo made their own decisions, and Dormer would monitor their performance monthly. New rules were created, made out of Hitachi and Ansaldo rules.

“Simple English” communication

Communication is of course key. “We also encouraged the use of simple English in communication. Particularly to British people, who tend to use complicated words. This is also necessary for Japanese, Italians and Germans. Having a common language called Simple English will make your job much easier.”

With the acquisition of ABB’s Power Grid Systems business, the values were very similar, but nonetheless it was important to change the communication methods and processes. Dormer encouraged ABB executives to stay in Japan for six month to see for themselves how decision making works there. “We should change the way we ask questions. First of all, simple English. Then ask, “How does this process work?” You will find that 90% of the process is the same as theirs” says Dormer.

Hitachi is now hoping to acquire the railway signaling business of French electronics giant Thales – the UK’s Competition and Markets Authority has just approved. If the EU approves, Dormer hopes to use the same approach, resulting in Hitachi becoming number one in the global railway control market.

Kyowa Kirin acquires UK gene therapy startup Orchard Therapeutics

Kyowa Kirin will acquire British gene therapy startup Orchard Therapeutics for approximately $477.6 million (¥70.7 billion), to bolster its gene therapy pipeline.

Orchard Therapeutics’ portfolio comprises Libmeldy (atidarsagene autotemcel), also known as OTL-200, intended for eligible patients with early-onset metachromatic leukodystrophy (MLD), a rare and life-threatening inherited disease of the body’s metabolic system. It’s already been approved by the EU and UK regulatory bodies and is currently being reviewed by the USA’s Food and Drug Administration.

Orchard has 174 employees and Kyowa Kirin has around 6,000 employees worldwide, of which around 700 are in Europe. Kyowa Kirin is in turn owned by Kirin Holdings, a beer and beverage company. It acquired (when it was Kyowa Hakko Kirin), Scottish pharmaceutical company ProStrakan in 2011 and then in 2014 ProStrakan acquired Archimedes Pharma from Novo Nordisk.

Japan’s M3 acquires British medical staffing company Messly

Japan’s M3, a healthcare services company listed on the Tokyo Stock Exchange Prime Market, has acquired UK start up Messly, a recruiting marketplace platform for U.K. doctors, for surgeries and hospitals to hire locums, or temporary doctors, at short notice. It was founded in 2017 and 70% of the UK’s trainee doctors are registered on it.

M3 has already acquired several healthcare software and services related companies in France, Germany, Spain, Sweden and the UK since 2011 when it acquired doctors.net.uk. We estimate M3 has over 500 employees in Europe, out of 10,533 worldwide.

Japan owned British crypto currency firm B2C2 acquires France based Woorton

B2C2 was established in 2015 and acquired by Japanese company SBI (Strategic Business Innovator group, formerly part of SoftBank) in 2020. It employs around 90 people in the UK and also operates in the U.S., Cayman Islands, and Japan. The acquisition of Woorton means B2C2 not only expands its European operations but acquires Woorton’s PSAN license which is regulated by France’s financial market authority, the AMF. As a result, B2C2 can now cater to clients in the European Union, aligning with the upcoming MiCA regulations.

SBI is still operating in Russia as SBI Bank LLC, employing around 245 people.

Category: M&A