Tokio Marine may seek to satiate M&A appetite on run of smaller deals

Tokio Marine may need to put more of its M&A hopes into smaller-scale bolt-on deals as its long-sought dream of a major acquisition looks difficult on a demanding market, the group’s CEO has admitted.

“For high-quality and large-scale M&A we are still in a situation that requires much patience,” President and group CEO Satoru Komiya told an investor conference.

Large-scale deals would be the best fit for Tokio Marine’s growth and risk diversification goals, Komiya reiterated, but opportunities in the current market have been scarce, frequently leading to “over-inflated” valuations.

“On the other hand, we still see some bolt-on M&A opportunities or small-scale M&A opportunities” which Komiya rather considers a form of extended organic growth. “This is our strength, so we will be grabbing these opportunities to facilitate profit growth even more.”

“Bolt on M&A is a  Tokio Marine group forte and we want to make it our forte,” Komiya said.

The path to eventual success on a larger-scale deal would be painstaking. Komiya speaks to “thorough market intelligence” and “always keeping our eyes on the long list and the short list,” then building “meaningful” relationships before simply waiting out the wait for the right opportunity.

“I believe that is the discipline we need now,” he said.

Failure to identify appropriate targets could result in increased shareholder remuneration, Komiya reiterated of standing guidance.

Eventual purchases must also pass a hurdle rate which  Tokio Marine sees as its roughly 7% cost of capital, the presentation indicated.  Tokio Marine claims a 12.1% ROI on its to-date track record.

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