Cost of Recent Acquisitions Leave Olympus Mountain to Climb
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There could well be Corporate Finance jobs going at Olympus as the storm clouds gather over the 92 year old company. The value of shares in Olympus have fell by half in the last two weeks as the furore over the fees paid to two relatively unknown advisory firms, Axes and it’s Cayman Islands affiliate Axam, will not go away.
Former CEO Michael Woodford claims he was fired on 14th October for revealing that Olympus paid a fee that amounted to 36% of the acquisition price when they bought British medical equipment company Gyrus for bn.
That adds up to a stunning 7m (£430m)! The normal fee for this type of advisory work would be around 1-2% of the price, -40m. Ernst and Young, the worldwide auditors for Olympus, signed off on the deal but let it be known it had reservations about the fee. This is not the only time these fees have been paid though, a string of recent acquisitions by Olympus merit a second glance as it has been revealed that they have cost over .2bn in charges and write-offs.
Olympus Chairman, Tsuyoshi Kikukawa, has stepped down this week, but not before blasting Woodford for revealing the fees.
He had moved up, leaving the CEO position open for Woodford to be his successor, only a fortnight before Woodford was sacked.
Woodford, who had hired forensic accountants from PricewaterhouseCoopers to investigate his claims, has dropped hints in recent interviews that he fears for his life; meanwhile the FBI in the US has become involved amid speculation that there has been Japanese underworld involvement in the shape of the Yakuza. This whole episode is starting to play out like a Hollywood movie.
New Olympus President, Shuichi Takayama, has tried to quell shareholder’s fears and restore some order by promising to appoint an independent committee to investigate the affair; Woodford has slammed the idea, he claims such an investigation has already taken place which cleared the Olympus board of any wrongdoing.
Atushi Saito, the head of the Tokyo Stock Exchange has told Olympus they could face a potential lawsuit if the panel is not as independent as claimed and shows any sign of bias towards management.
What is clear is that there will be further repercussions for Olympus; shareholders will not be happy as the share price continues to fall. It is looking very likely that more heads will roll in the next few days and weeks.
Zero-One Design Ltd