Is Post merger integration (PMI) of subsidiaries and businesses acquired through M&A going well?

In M&A in the amusement business, as disclosed today in “M&A Progress and First Quarter Outlook”, all of the six amusement arcades acquired after SEGA ENTERTAINMENT have shown significant growth in operating income before depreciation and amortization (EBITDA), and and PMI is progressing well.

In addition, for the three amusement arcade projects prior to the IPO, the timing of the cash flow to GENDA stated in February 2022, a little over two years ago for Takarajima, and October 2022, about 18 months ago for Sugaidinos and Avice, but they have already achieved a full recoup of the initial investment, and the cash flow generated now is all upside for stakeholders. The current cash flow is entirely upside for stakeholders.

In addition to appropriate entry valuations based on cash flow (that is not assuming PMI), which is GENDA’s primary focus, the PMI has actually been successful and the situation is showing a “flywheel effect”. With regard to amusement arcades, since the PMI “format” has been established, we will proceed in the same manner for projects after the IPO.

PMI is also progressing very well in the karaoke business. Specifically, Shin Corporation, which had been making loss in the single-month of February for 35 consecutive years since its establishment, quickly returned to surplus in February 2024, the first single-month profit since its establishment, when GENDA began consolidation. The Company’s full-year target of achieving its highest profit since its establishment is now even more certain.

We will continue to strive to maximize synergies outside of amusement arcades, such as karaoke. We will announce these results at the appropriate time once we have comparable data for a certain period of time after the M&A.

As mentioned above, the synergies themselves from the affiliated group of entertainment companies can be realized in a wide range of fields. However, as we answered in “Q1” of this document, GENDA is thoroughly committed to acquiring companies at appropriate valuations, and our Investment Committee is leading us in the basic principle of investment: invest money and recover more money than it is invested. We are thorough in our efforts.

Therefore, GENDA conducts M&A transactions that allow for a sufficient return on investment even without the improvement of business performance through PMI, and for GENDA, PMI only adds extra value.

Tag: 2024/4/23