In order to accelerate our achievement of ¥100 billion in sales, SHIFT has proactively conducted M&A to add service functions and recruit highly talented engineers. Specifically, we are reforming our sourcing strategy, securing sufficient financial resources, and clarifying decision-making standards. We also encourage our group companies that joined the SHIFT Group to rebuild their business models through the setting of mission, vision and core values and to formulate PMI by utilizing assets of SHIFT.
What size do you look at in terms of M&A capacity?
We have not set a limit to the size of targets. We focus on companies that share the vision and mission of the SHIFT Group as well as possessing the services, technology, and engineers that will allow them to grow alongside SHIFT. If a target fits those criteria, we have prepared a sufficient financial foundation and cash to be able to perform M&A activities, even for companies at or above a certain size.
How do you make decisions about M&A?
SHIFT considers the following four points when making decisions, as well as whether the target company is consistent with the SHIFT Group’s M&A policy,
Whether their added value is high enough and unit price improvement can be expected
Whether their customer population be utilized
Whether they immediately contributes to profit over its goodwill
Whether the acquisition price is relatively cheap (around 10 or less than 10 times EBITDA)
However, even in cases that do not necessarily meet all the criteria above, we actively consider cases if the synergies with the SHIFT Group are expected to be high or if they have outstanding technology or personnel.
How do you source funds for M&A?
Based on a comprehensive consideration of our current funding situation and our medium- to long-term business and financial strategies, we will use direct financing (mainly through public offerings) and indirect financing (mainly through bank borrowings), with the aim of raising funds that contribute to the improvement of our corporate value.
The most recent data available is a bank loan in September 2021 under the framework of Positive Impact Finance. SHIFT’s mission is to address ESG issues, including the IT talent shortage and industry transformation, and this is the background of its implementation as a fund raising related to M&A that contributes to the mission.
How does SHIFT handle post-merger integration (PMI)?
Centrifugal force and centripetal force are key concepts in SHIFT Group’s approach to running its business.
We let each group company to conduct their business and would not change their basic business management after joining the SHIFT Group, such as the company name, management team and personnel system.
On the other hand, jobs that can be shared with SHIFT, such as recruitment, sales, and treasury, will be integrated into SHIFT to promote cost efficiency and the full use of SHIFT’s strengths. SHIFT has a dedicated PMI promotion team, and from the perspective of sharing the vision of the entire group, the president and management members of all group companies regularly meet at management camps and build relationships to create synergies.
How is the M&A environment?
We have implemented a thorough sourcing reform and created an environment in which we can actively introduce good deals that meet SHIFT’s needs. This allows us to constantly expand our long and short lists of potential M&A destinations.
In addition, due to the impact of the COVID-19 and the growth of existing group companies, the number of deals brought in has increased significantly. Therefore, we believe the M&A environment is robust.
What is your M&A policy?
We are promoting M&A activities with the aim of further corporate growth and strengthening the SHIFT Group’s service portfolio. M&A candidates should meet the following four criteria:
Companies which covers areas that SHIFT currently does not.
Small and midium sized IT companies that employ talented engineers but struggle with business succession.
Major prime vendors which have user companies as thier customers.
Companies which handle information about personnel, products, and resources to strengthen our platform business.
M&A is positioned as one of major growth pillars in our medium-term growth strategy. There are two M&A purposes: to secure outstanding talent and to expand and strengthen the group’s service areas. Since joining the group, we will seek to provide comprehensive services as ONE-SHIFT, with an eye to maximizing synergies with SHIFT and our group companies.
Are M&A included in the guidelines?
Basically, the guidelines do not include plans for M&A because it has highly uncertain factors.
What kind of companies are the target of M&A?
We have established the following M&A standards as a rough guide to expedite decision making.
Companies which covers areas that SHIFT currently does not.
Small and midium sized IT companies that employ talented engineers but struggle with business succession.
Major prime vendors which have user companies as thier customers.
Companies which handle information about personnel, products, and resources to strengthen our platform business.
However, even if the company does not necessarily meet all the criteria above, we expect the group company candidate to have services/technology/ engineers, etc. that enables us to grow together with the SHIFT Group, and sharing the mission and vision of the SHIFT Group.
What are the benefits of joining the SHIFT Group?
Together with all the companies in the SHIFT Group, you can aim further growth.
Through providing business management tools, sales and recruitment capabilities, executive personnel, that are SHIFT’s strengths, and through collaboration with other Group companies, you will be able to cultivate new customers especially, prime customers, and create an environment in which you can focus on expanding your business.
