A Disastrous Takeover for Toshiba

This may turn out to be a classic example of how not to undertake external growth through a takeover!

Whilst best known for its consumer electronics businesses, Toshiba is a diversified conglomerate business.

It has been involved in the global nuclear power industry since 2006 when it acquired a US business Westinghouse Electric.

However, a recent takeover by Westinghouse Electric has threatened the future of Toshiba as a whole. Toshiba' shares fell by 40% in just days at the end of 2016 as significant problems were disclosed in the nuclear power division.

Westinghouse Electric had acquired another nuclear business - Chicago Bridge & Iron - that was already heavily involved in nuclear plant construction. The problem? What Westinghouse Electric had failed to realise was that these nuclear projects were in difficulty and suffering substantial delays and cost overruns. Now those losses have become clear, Toshiba shareholders are left with hugely damaging asset write-offs and liabilities to finance.

A classic high-risk investment that failed spectacularly.