THE chase for loss-making companies continues, with Globetronics Technology Bhd acquiring loss-making Mpire Global Bhd.
This follows Flexidynamic Holdings Bhd’s purchase of loss-making manufacturer of glove formers, Formtech Engineering (M) Sdn Bhd, for RM10.39mil back in June.
Both Globetronics and Flexidynamic have said that the acquisitions align with their strategies for sustained growth and further expansion.
But why acquire loss-making companies?
In both cases, there are synergies to be reaped.
By buying Formtech, Flexidynamic – a solutions provider for the glove industry – can now offer upstream glove-former products alongside its chlorination and other engineering services.
Industry players also noted that since both companies serve the same sector but do not significantly overlap in customer base, there is strong potential for cross-selling products.
As for Globetronics, the purchase of Mpire provides an opportunity to diversify beyond the semiconductor sphere.
Mpire is involved in property construction and development, as well as fleet management services, including vehicle trading and leasing.
Globetronics, having paid RM45mil for Mpire, hopes to leverage these different businesses and eventually benefit from all the operations.
It helps that Globetronics is a cash-rich company, so the purchase has no material impact on its gearing levels.
In every business deal, there are risks – but more often than not, these risks tend to sort themselves out over time.
For those who can wait it out, the benefits can be significant.
Of course, this depends on several factors, including finding ways to stem losses, especially when the acquired companies are loss-making.
Companies with a track record of good and prudent financial management will likely find this fairly easy to manage.
Back to Globetronics and Flexidynamic – only time will tell whether their acquisitions turn out to be a gamble, or a win.