Reflection on 2024: 7 Companies Acquired with a Total Investment of 6.3 Billion Yen
This post is part of the CrowdWorks Group Advent Calendar 2024 series, marking the 25th entry.
As the CEO of CrowdWorks, I’m reflecting on an eventful 2024. The standout achievement for this year was undoubtedly our successful M&A and investments involving seven companies, totaling 6.3 billion yen. This milestone has drawn significant attention from institutional investors and sparked numerous conversations. Many remarked that this marked a clear shift in our corporate strategy, and friends and fellow executives often inquired about this change.
Here’s a breakdown of the seven acquisitions:
Wholly Owned Subsidiaries: 4 companies
Capital and Business Alliances: 2 companies (one of which is an equity-method affiliate)
Business Transfers: 1 company
In addition, over the past three years, we’ve integrated five companies into the group. These 12 companies have all continued to grow without incurring any impairment losses—a testament to the strength of our approach.
As I’ve been asked by investors and friends:
“How did you, with no prior M&A experience, develop the capabilities to successfully execute M&As?”
Below, I’ll outline the journey that brought us to this point.
Background 1: Lessons from a Failed M&A (FY18-20)
Key Events
November 2017: Subsidiary acquisition of Deneen Co., Ltd. (960 million yen)
June 2020: Sale of Deneen to SBI Technology Co., Ltd. (1.33 billion yen)
Our first M&A attempts were far from successful. We acquired Deneen in 2017, hoping for synergy by integrating its IT system development for major Japanese corporations. However, after the integration, we faced barriers—Deneen prohibited remote work and only operated onsite with no flexibility for freelancers. This completely negated any potential synergy with our existing business model, leaving the acquisition as merely an addition to our revenue, without significant growth.
This experience taught us:
If you cannot grow an acquired company yourself, there’s no point in being part of the same group.
Growth stagnates when acquisitions only contribute incremental revenue without addressing weighted average cost of capital (WACC).
Despite these setbacks, we managed to sell Deneen for 1.33 billion yen, realizing a 470 million yen profit. This was a significant accomplishment for a company like ours, which had previously posted losses, proving our resilience.
Key Learning 1: The Importance of “Who Am I?” (FY20-24)
Key Events
June 2020: Prior to selling Deneen, we transferred its SaaS business to CrowdWorks and rebranded it as "CrowdLog," with an initial annual recurring revenue (ARR) of 65 million yen.
September 2024: CrowdLog achieved an ARR of 640 million yen—a tenfold increase in four years!
Reflecting on our earlier mistakes, it became clear that we failed because we didn’t understand our core identity—our "Who am I?". Acquiring a company that prohibited remote work was fundamentally misaligned with who we were.
At the time, CrowdWorks was defined by two key pillars:
Product: A matching platform, CrowdWorks.jp
B2B Sales: An agency model where our staff directly supported clients
Recognizing this, we focused solely on Deneen’s SaaS product, transferring it to CrowdWorks’ core operations. The result was a remarkable 10x growth over four years.
This realization led to the development of the “CW Growth Driver: Five Core Assets of CrowdWorks”, a framework we now openly share in investor relations materials.
Background 2: Challenges in Recruiting M&A Experts (FY18-21)
As we struggled with our initial M&A attempts, it became evident that continuing with a patchwork approach was unsustainable. We needed M&A specialists. However, with annual revenue stagnating at 8 billion yen and operating profits in the red or barely positive, our company wasn’t attractive to top talent.
Key Learning 2: Improve Yourself First (FY21-22)
The Tokyo Stock Exchange once issued a report noting that small companies seeking institutional investors must first analyze why their valuation remains low and work to address those issues. This was precisely our situation.
Before seeking M&A success, we needed to improve our fundamentals. We implemented a productivity enhancement policy to restructure our management systems and create replicable growth models. By FY21, this effort resulted in operating profits of 570 million yen, catching the attention of Mizuho Securities' investment banking team. Thomas Aiba, one of their top bankers, was so impressed that he joined our team as CFO in November 2021 (FY22).
In FY22, we achieved 1 billion yen in operating profit (Non-GAAP), laying the groundwork for sustainable growth. This demonstrated that improving ourselves made us capable of attracting top talent.
Background 3: Numerous M&A Questions (FY22-24)
During our M&A journey, countless questions arose:
How do we identify promising deals?
How do we build relationships with brokers to secure good deals?
What are the benefits and drawbacks of direct negotiations versus brokered deals?
How do we navigate strong seller price expectations?
How do we secure exclusivity in negotiations?
What negotiation strategies work best to close deals?
How do we integrate newly acquired companies (Post-Merger Integration or PMI)?
What do we do when unexpected issues arise during due diligence?
Key Learning 3: There Is No Magic Solution (FY22-24)
While I’ve developed answers to many of these questions, the overarching truth remains: there’s no magic solution. M&A is a process of establishing policies for every step—from initial discussions to post-integration—and constantly testing, executing, and improving these frameworks.
Examples of Value-Adding Post-M&A Strategies
Database Integration:
Utilizing a platform with over 800,000 registered users and 70,000 clients
Enhancing client and worker matchmaking through data-driven improvements
Corporate Productivity Initiatives:
Improving collection rate of receivables & reducing bad debt to boost gross profit
2020-2024 Timeline Summary
FY2020-2022: Completed a three-year productivity improvement plan, reaching 10 billion yen in revenue and 1 billion yen in operating profit (Non-GAAP)
FY2023: Expanded M&A capabilities
FY2024: Established a continuous M&A system, acquiring seven companies for a total of 6.3 billion yen
A Farewell and New Beginnings
At the recent shareholder meeting, our founding CTO, Nomura, announced his departure after 13 years of partnership. I’m immensely grateful for our journey together and excited for his next chapter in agriculture.
As we transition to a new leadership team, we are committed to our mission of "building infrastructure for individuals" and are poised for another year of growth.
Alumni meeting & Nomura（Founder/CTO）’s retirement party
Thank you for your continued support, and best wishes for the New Year!