Sojitz Corporation’s alliance with Royal Holdings Co., Ltd

Frontier Management Inc. (CFI Japan) announced that they acted as financial adviser to Sojitz Corporation in the capital and business alliance with Royal Holdings Co., Ltd. and the acquisition of 60% shares of Royal In-Flight Catering Co., Ltd.

Royal Holdings Group’s mission is to improve the lifestyles of citizens through food and hospitality services. Royal Holdings possesses a strong business foundation, and the company operates five business segments.

Sojitz has been engaged in the aviation business for over 60 years, serving as the sales agent for U.S. Boeing aircrafts in Japan from 1956 onward. In recent years, Sojitz has engaged in airport industry operations, including the operation of airports both in Japan and overseas. In addition, Sojitz possesses diverse networks and know-how in business fields with high relevance to Royal Holdings, such as Sojitz’s shopping centre operations, and food distribution business primarily in Vietnam and other ASEAN countries.

An Interview with Toshi Mitsuzawa, Senior Managing Executive Officer, Head of Financial Advisory Department

What financial advice often prevails in an acquisition?

In order to support Sojitz in their investment process, we took a holistic approach and provided them with discussion materials that covered a wide variety of key topics, such as: the investment structure, business analysis, financial models, potential synergies and more. The main concept behind these discussion materials was how this alliance would bring about additional value for Sojitz.

How do you ensure everything runs smoothly?

Throughout the deal we engaged in proactive communication, not only with our client, but also with other related parties and took a flexible approach for certain situations. This allowed us to overcome various unexpected issues as they happened. Furthermore, the commitment of the members in the deal team played a crucial role in ensuring that the deal was smoothly executed. Although the time allowed for due diligence was very limited and there were several critical issues to be tackled, we were able to resolve these in a satisfactory manner thanks to the efforts of all the deal team members.

What could potentially go wrong in an acquisition like this? How did you work around it?

One key issue we often face is how to look at the business forecasts of a company that is currently affected by the pandemic. While the latest financial results showed a downward trend, we conducted a deep-dive analysis on the essential value of the businesses and also considered a potential business expansion under the alliance. Based on our analysis, we arrived at a reasonable valuation to support this investment. In these unprecedented times, a careful and deliberate approach is necessary when investing and as such, a financial adviser is required to prepare a comprehensive valuation based on deep analysis and one that is reasonably supported by facts.