Having covered the perceived failures of the Nippon Sheet Glass/Pilkington, Daiichi Sankyo/Ranbaxy and Ricoh/Ikon M&As, Nikkei Business in its December 9th edition then goes on to examine some of the more successful deals by NTT Communications, Kirin Holdings and Terumo.
NTT Communications bought US telecommunications company Verio in 2000 for $5.5bn, just before the dotcom bubble burst, resulting in NTT Communications posting a $5bn loss in 2002. Nikkei Business points out the same assumption was made “that the company would just keep growing as it is” that Nippon Sheet Glass and other Japanese companies made about their acquisitions and that the acquiring company then uses economic crises as an excuse for the acquisition’s failure and the need to shrink it down or cut back, rather than their lack of any plans for worst case scenarios.
NTT Communications went down that route, and did not make any further major acquisitions until 2011, however, they used the intervening years to completely overhaul their M&A strategy. Instead of relying on investment banks and consultants, they decided to build up their own knowhow and insist on planning beforehand how they were going to restructure any business, rather than after the acquisition was made. In the case of Verio, they pulled out of the ISP business and merged the backbone business with NTT Europe, leaving only small-medium enterprise hosting with Verio. This was in order for NTT to strengthen its services to larger customers.
As well as rethinking how to restructure their business, they also decided that future candidates for acquisition would be found by themselves, and analysed inhouse – all aspects from management, services, legal, financial and HR. They listed up over 1000 targets for this process. They saw the need to get back into the acquisition game as the telecommunications market was changing, and there was a need for interconnected large scale data centers, used by multiple customers. NTT Communications felt the only way to put such an infrastructure in place quickly was through acquisition. In 2012 they bought an Indian data center company Netmagic and UK company Gyron Internet, followed by a French web based conferencing system company Arkadin and then in 2013 spent a further $875m on US companies Virtela and Raging Wire. Operating profit has been on the rise since 2011, and sales look to be recovering next year too.
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