Plans call for setting up a series of operating companies under the holding company and aggressively expanding operations in the commercial facility services field through subsidiary companies.
The holding company will specialize in strategic corporate planning and the management of its subsidiaries, thus making a clear distinction in functions between the holding company and enterprises engaged in actual operations. This is the first time this type of corporate organization has been employed in the facility services industry in Japan. It is expected to allow the companies greater leeway for flexible management of their activities, while also permitting strategic planning from a broader perspective and specialized corporate management. In establishing the operating companies, plans call for making acquisitions of existing companies in the field in line with the concept of buying time and clientele as the acquired companies are placed under the control of the holding company.
Plans call for establishing the holding company in May 2001, under the name Bussan ISS Holding Co., Ltd. (BISS), with capital of ¥100 million. ISS will work to enhance the quality of facility services in Japan by introducing the building cleaning and equipment maintenance methods it has developed around the world. ISS has abundant experience in corporate M&A and will apply this know-how in acquiring companies in the facility services field in Japan. Over the coming five years, BISS plans to become the leading company in Japan in this business area.
NESCO was established in 1973 and has engaged principally in providing office building maintenance services, including security, facilities management, and parking lot supervision services. Its revenues for the year ended December 2000 were ¥3.6 billion. Through the alliance with ISS, NESCO intends to improve the awareness and outlook of its staff, acquire systematic operating know-how in building cleaning, obtain methods for on-site management, acquire performance management techniques using benchmark methods, and introduce systems for the rapid closing of accounts.
ISS was founded in 1901 as a security services company in Copenhagen, Denmark. After entering the building cleaning business in 1934, it expanded its activities mainly in the Scandinavian countries, but in recent years it has entered markets in other parts of Europe as well as in Asia and Latin America and has rapidly expanded the scale of its operations. At present, on a consolidated basis, ISS has a total of 270,000 employees and conducts operations in 36 countries. Revenues for the year ended December 2000 amounted to ¥430 billion, making ISS the largest facility service company in the world. The company has a total of 61 holding companies, with 120 companies under their control.
ISS shares are listed in Denmark and the United Kingdom. The company has challenged existing concepts to improve the social awareness of cleanliness and, while working to improve the education and training of its employees and anticipate customer needs, has been successful in achieving a turnaround in performance in many of the companies it has acquired. ISS facility services are not limited to cleaning, and it has a reputation for providing additional value-added services.
ISS has been interested in entering the Japanese market for some time. Rather than entering the market on its own, ISS decided to form a strategic alliance with Mitsui because of Mitsui’s ownership of NESCO and its position as the leading shareholder of Aim Services Co., Ltd., Japan’s largest food service provider for business establishments (listed on the Second Section of the Tokyo Stock Exchange). Through this alliance with Mitsui, ISS is aiming to expand its position significantly in a relatively short time not only in office building maintenance but also in providing services for hospitals, airports, food product manufacturing facilities, and companies in a broad range of other fields.
The market in Japan for facility services, focused on the maintenance and management of various types of structures, is a huge industry, with sales estimate to be¥2.6 trillion. Many individual enterprises in this industry, however, are faced with declining performance because of downward cost pressures from their customers and competition with other companies in the same sector. Even the largest corporation in the industry has less than¥100 billion in annual revenues, including those from its condominium management activities. Most are subsidiaries of large companies or small to medium-sized enterprises, and the number of companies in the sector is more than 10,000. Looking forward, most observers expect a major consolidation and shakeout in the industry along with the growing trends toward outsourcing these services and the return of parent companies of enterprises in this sector to their core businesses.
The alliance between Mitsui and ISS is expected to bring the introduction of modern management styles to the traditional facility service sector. Mitsui intends to aggressively develop operations with ISS in facility services as one core part of its service business activities.
