We will now begin the briefing by OMRON Corporation on the acquisition of OnLogic U.S. as a wholly-owned subsidiary. Thank you very much for joining us today despite your busy schedule and the short notice. This briefing is being streamed online for market participants and members of the press whom we have invited. We appreciate your participation. Please note that simultaneous English interpretation is available for today's briefing. If you need English interpretation, please use the headset provided at the reception desk. We plan to finish this meeting at 12:00 P.M. Now, let me introduce today's speakers. First is Mr. Junta Tsujinaga, President and CEO.
I am Tsujinaga. Thank you for joining us today.
Next is Mr. Seiji Takeda, Senior Managing Executive Officer, CFO, Global Strategy Headquarters.
I am Takeda. Thank you.
Next is Mr. Motohiro Yamanishi, Managing Executive Officer and President of the Industrial Automation Company.
I am Yamanishi. Thank you.
I am Kurauchi from the Investor Relations Department, and I will be facilitating today's session. Now, I would like to outline the agenda for today. We will begin with presentations by Mr. Tsujinaga and Mr. Yamanishi, followed by a Q&A session. During the Q&A session, we will first take questions from investors and analysts, followed by questions from the press. Please be aware that the recording of this briefing, including the Q&A session, will be posted on our company website. Appreciate your understanding on this matter. Now, let's move on to the presentation. To begin, Mr. Tsujinaga will provide an explanation. Mr. Tsujinaga, please go ahead.
Good day, ladies and gentlemen. I am Tsujinaga, President CEO. Thank you very much for coming despite your very busy schedule on making American company, OnLogic, a fully owned subsidiary of our company. This time, we have resolved at our board meeting to make a U.S. company, OnLogic, the fully owned subsidiary of our company. We wanted to convey to you about this acquisition as soon as possible. First of all, as CEO, I'd like to talk about the outline and the background of this project. After that, Yamanishi, who is the President CEO of IAB, will explain in detail. Please look at the next page. This time, we are going to make this acquisition to make OnLogic a fully owned subsidiary, which is a company in the IAB field, doing design, manufacturing, and sales. This is the investment to strengthen the growth foundation of IAB.
Through this project, we will acquire the growth foundation of North America of IAB. At the same time, we will structure the DX foundation of Gemba. The acquisition price is $675 million. On October 1, we have implemented the transaction of IAB, and we will use that fund as the fund to make this acquisition. We have decided, following a very rigorous investment discipline we got in our company, and we will maintain the sound financial nature of our company. We have no change in the shareholders' return principles. Let me explain the background. As we showed you in November last year, SF 2030 second stage, what we are aiming at that second stage, is the offensive and the defensive management. Two wheels in our management.
I have said that we have to reconstruct the portfolio without any holy cows, and we wanted to continue the structural reform. On October 1, we have implemented the transfer and sales of DMB the electronic parts business. I have decided on the sales of electronic parts business because we wanted to realize the sustainable development of this business. At the same time, we wanted to create the power to make a further investment into the future, which we need for the growth of 13 focus businesses. This is what I have promised hitherto. In the financial presentation in May of this year, I have talked about the expanding customer bases, mainly in Europe and the United States, as well as implementing M&A directly connected to data service.
Indeed, the project that we are going to talk about today is going to be the implementation of what I have promised. Not limited to this project, I'll be concentrating my efforts for solidly implementing what I plan to do. Please look at this- Next slide. This is meaningful as area portfolio, as well as capital efficiency. First is the viewpoint of area portfolio viewpoint. The acquisition of OnLogic will connect to the growth foundation in North America, which is a growing market. By solidly dealing with the expanding demand in North America, we will evolve our area portfolio into well-balanced area portfolio. Next is the viewpoint regarding capital efficiency. I always position capital efficiency as the important index of our management. As I said at the outset, this was decided following a very rigorous investment discipline that we established in our company.
We do not judge because of the short-term impact, but we will attach importance of whether this project will create a cash creation in medium term, and I am always concerned with improving the overall capital efficiency and enterprise value. By implementing this, FY 2030 ROE will improve +1 point and ROIC will improve by +0.5 point. That is what I aim at. Now, CEO IAB Yamanishi will explain the details of this acquisition.
Ladies and gentlemen, thank you very much for gathering today. I am Yamanishi, CEO of Industrial Automation Company. IAB, hitherto, capitalized on the world-class control technology supporting the innovation of customers and manufacturing. Now, the environment surrounding our customers is drastically changing in North America. In addition to the sophistication of manufacturing, data center, energy infrastructure, in such new domains, capital investment is expanding.
Also, in the global manufacturing, the amount of data increased by leaps and bounds at Gemba. Not only control, but the massive data has to be processed in a high speed at Gemba, and it has to be connected to value creation. Acquisition of OnLogic this time is going to capture the change of the market as well as the growth opportunity. This is a strategic investment leading into growth opportunity. First, I would like to talk about the outline of OnLogic, and then having done so, I will explain the strategic significance and the financial objectives that we aim at. First, what kind of company is OnLogic? Let me introduce to you. OnLogic was established in 2003. It is a company in the United States. It is so-called IPC design, manufacturing, and sales company for industrial computers.
I would like to draw your attention to the growth potential and profitability of this company from FY 2020 to FY 2026. The revenue grew by 20% on average per annum. In addition, in terms of the operating profitability, it maintains at 22%, very high level. This is a company equipped with growth potential and profitability. Recently, because of the demand expansion of physical AI and edge computing, further growth is expected. OnLogic is a company not only having a promising future, but it is a company already delivering high growth and profitability. The IPC, which is the main product of OnLogic, is something that I would like to explain more in detail. First, OMRON was the battlefield globally, PLC, is like a spinal cord, to use a human analogy. In other words, a power to move a power body immediately.
At the manufacturing Gemba, motor has to be moved, it has to be stopped, it has to be calibrated, so the predetermined motion has to be delivered fastly and accurately, and that is the role of a PLC. On the other hand, IPC is like a brain of a human body. In other words, power to think, collecting massive amount of data, then doing the calculation, and then making judgment. That is IPC. As noted on the right-hand side, market for IPC against the background of data increase with AI, the CAGR about 13%. The growth is accelerating. What is important here is that PLC and IPC have evolved individually, separately. At the same time, those two did not connect at Gemba fully. Recently, in advanced manufacturing, in addition to moving equipment very accurately and fastly, the data, massive data, has to be used, which is generated at Gemba.
That is the growing needs. To that end, data has to be processed and utilized, that is IPC, and PLC, which reflect that result to Gemba. So they have to be coordinated very closely at Gemba. This is exactly the backdrop which led into this acquisition. Next, I would like to talk about the strength of OnLogic. This company's strength is not in IPC itself. The ability to implement in delivering the optimal IPC for every customer's Gemba environment speedily and efficiently is indeed the strength of OnLogic. Business model and management capability supporting that is the strength. General IPC manufacturers would sell large quantity of standard products through marketing channels or deal with specific customers in a fully ready-to-order fashion. OnLogic has created a unique position, which is intermediate of the two.
Concretely, a modular design philosophy is employed like a Lego block, and 1 million configuration is possible combining CPU, I/O, communication, and casing. As a result, they optimize the use of customers. At the same time, cost and delivery period are not so big like the fully ready-to-made modality. They don't deal with agents, and therefore, they can propose optimal configuration at the apps level. At the same time, they have established the operation of big lots and small quantity. What we value highly is the computing foundation is delivered speedily in an optimal way, integrating products, marketing, and supply. This is the integrated business model and needed by customers. This is not so easily copied by other companies. This is indeed the core competence of OnLogic. Furthermore, what I was impressed very strongly was the management capability, which created this competitive advantage.
I have repeated a dialogue with the OnLogic's management. I was convinced that the source of this competitive advantage lies in the management team and the professional teams. Modular design, direct sales model, big lot, small quantity operation, they are operated in an integrated way, in a functioning way, and that is the strength of this management team. Today's operating profitability, 20%, revenue CAGR 20%, indeed show the result of this management capability. Another big value that I highly value is the customer base that OnLogic has created. Look at the left-hand side. OnLogic has a global 5,000 and more companies as customers, of which 2,000 companies are the customers in the FA domain in North America. For many years, they have created such customer bases, which is an important managerial asset of OnLogic. Please look at the right-hand side.
As you can see, the customer base is not limited to FA domain, data center, infrastructure, energy, and they develop into a variety of growth industries. In other words, OnLogic is not a company dependent upon a specific industry segment or use. They have the tangential points with the broad industry customers and in every market that they have created a solid position. What we highly value is the relationship that this company has with more than 5,000 companies. This customer base is one of the big value that OnLogic has.
I will now explain what we aim to achieve by leveraging the strengths of OnLogic that I have just outlined. There are two major strategic implications of this initiative. The first is the acceleration of growth in our North American operations. Through this investment, we will gain a customer base in North America and access to a growing market. By combining this with OMRON's existing business foundation, we aim to accelerate growth in our current operations and expansion into new markets, targeting an annual growth rate of 8% for our North American business. The second implication is the acquisition of an operational foundation for the era of physical AI in advanced global manufacturing. By integrating OMRON's control technology with OnLogic's computing platform, we will build a business foundation for next generation automation. I will explain each one of these points.
First is the acceleration of growth in our North American operations. While OMRON already possesses a strong customer base in the North American factory automation sector, the scope and scale of the base are not yet sufficient. In contrast, OnLogic has built strong relationships with approximately 2,000 mid-size companies in the FA field. This represents far more than just a customer list. It means instantly gaining access to these 2,000 customers, relationships that OMRON had not previously reached, and that would be difficult to build from scratch even over several years. By combining OnLogic's industrial PCs with OMRON's industrial automation and sensing equipment, we will secure a new engine for growth in North America. Furthermore, through this strategic investment, OMRON will expand its business beyond the factory floor, starting in North America, into the operational domain of infrastructure that supports society. This includes data centers, telecommunications infrastructure, and facilities.
The number of such facilities is rapidly increasing worldwide. However, the crucial factor is not merely manufacturing the equipment. It is ensuring their continuous, uninterrupted operation. By combining OnLogic's industrial PCs with OMRON's control and sensing technologies, we will then enable equipment condition monitoring, anomaly detection, and remote control. In short, we are expanding our business scope from factory automation to the optimization of operations for infrastructure that supports society. This represents a new challenge in a key growth area for North America. Please note that the business opportunities beyond factory automation shown on this slide represent future growth prospects rather than short-term revenue targets. While these are not currently incorporated into our formal business plan, we view them as viable medium to long-term growth options that we can realistically pursue by leveraging OnLogic's customer base and technology. So far, I have discussed our growth in North America.
Now I will broaden our perspective to a global scale. The second strategic significance lies in securing an implementation platform to realize physical AI within the area of advanced global manufacturing. To date, leveraging our strengths in advanced control technology via PLCs, OMRON has delivered value in sophisticated manufacturing environments, such as those for semiconductors and secondary batteries. Level one shown here represents OMRON's current strength, operating equipment with high precision at speeds faster than one-thousandth of a second, exactly as programmed. This control technology is the very foundation of OMRON's competitive advantage. However, what customers demand going forward goes beyond merely operating equipment correctly. They require continuous optimization through the utilization of on-site data. By combining OMRON's PLC with OnLogic's IPCs, we move from control to optimization. This represents an evolution to level two and constitutes the implementation platform we are now acquiring.
What kind of value does this generate on the actual factory? Let me explain using semiconductor manufacturing equipment as an example. In advanced semiconductor manufacturing, as the process becomes increasingly miniaturized and three-dimensional, even slight variations in process conditions can significantly impact quality and yield. However, current practices typically involves checking results after a process is complete, analyzing various equipment data, and then revising the process conditions for optimization. Consequently, improvements can only be implemented for the next day's run or the subsequent lot. Naturally, the products processed in the interim have already been manufactured. Even if there was potential to achieve higher yields, those improvements are not reflected until the next lot or later. Therefore, the key is to shift from improving after production to optimize during production. It is important to note that the challenge does not just lie in the lack of PLC performance.
OMRON's PLCs are capable of executing set conditions quickly and accurately. The issue has been the lack of a sufficient mechanism to continuously assess whether these process conditions are truly optimal and to make improvements in real time. On the other hand, by combining OnLogic's IPC with various applications, for instance, in semiconductor manufacturing, it becomes possible to process vast amount of data, such as the condition of wafers and materials inside the equipment, or mechanical degradation, to detect early on the subtle changes that lead to yield loss, and to utilize this information to optimize process conditions. However, an IPC alone cannot reflect those results in equipment operations on real time. In short, semiconductor manufacturing requires both the ability to identify optimal conditions and the ability to execute those conditions quickly and accurately. This is where the fusion of PLCs and IPCs come into play.
The IPC analyzes data from the production floor, and the PLC applies those results to control operations. This enables continuous near real-time optimization during production without having to wait for the next lot. This is the real-time optimization of PLC times IPC shown on level two. That was about level two. It represents an evolution from mere control to optimization. From the perspective of traditional manufacturing, this is a significant progress, and beyond that lies level three. At level two, PLCs and IPCs continuously optimize equipment operations within the scope of human-defined goals, pre-established conditions, and rules. In other words, it is a domain where the optimal solution is performed within a framework set by humans.
Level three, which lies beyond that, is a domain where AI, while adhering to critical constraints such as quality and safety, responds to changes that humans had not anticipated beyond existing frameworks and autonomously derives optimal solutions. On the manufacturing Gemba, changes that cannot be fully predicted, such as material variability or equipment degradation, constantly occur. At level three, AI detects these changes and devises new improvement measures for situations that existing rules cannot handle. It then implement these measures into the control system, learns from the results, and continue to drive further improvements. This is the world of physical AI that we aim to realize. What makes OMRON's approach to this unique? It lies not in the AI itself, but the ability to transform AI into value within the customer's operational environment.
Leveraging a wide range of sensing technologies cultivated over many years, OMRON can capture the various changes occurring in equipment and processes. Meanwhile, OnLogic possesses the capability to flexibly configure computing infrastructure tailored to the specific environments and applications of each customer. AI analyzes the changes captured, and the resulting decisions are translated into real-time actions on the factory floor with high speed and precision, driven by OMRON's control technologies. It goes beyond simply making a single robot operate. It involves orchestrating manufacturing equipment and indeed, the entire factory, to drive tangible results for the customer. AI merely providing an answer does not create value. The true value lies in executing the answer on-site and turning it into a customer. This is the unique essence of OMRON's physical AI.
That is precisely why the significance of our partnership lies not merely in envisioning the future, but in making it a reality. Finally, look at the financial targets. We aim to grow combined sales comprising OnLogic standalone revenue, plus the impact of synergies from a projected $255 million in FY 2026 to over $300 million in FY 2028, and ultimately to over $400 million in fiscal year 2030, the final year of our midterm roadmap. Three key drivers will support this growth. The first is sustained growth for OnLogic as a standalone business. We will continue to grow steadily by leveraging the strengths the company has cultivated to date. The second driver is synergy derived from mutually leveraging both companies' customer bases, allowing us to deliver new value to the respective customers of OMRON and OnLogic. The third driver is the creation of new value through joint development.
We will generate value that is only possible through the integration of the two companies, such as new products that combine PLCs and IPCs. By combining these three growth drivers, we aim to achieve robust sales growth while targeting an operating profit margin of 24% or higher by fiscal year 2030. In closing, I would like to share my personal perspective as the president of the IAB Company. While considering this initiative, I repeatedly asked myself, "Why OnLogic? Why is OMRON partnering with them?" The answer lies in something more than just the fact that they operate in the IPC business. I believe that the technology itself is less important than the ability to transform that technology into tangible results at the customer's work site. OnLogic is not merely a company that sells computing hardware.
They possess the capability to implement computing solutions in an optimal way to address the unique challenges faced by each customer, ultimately delivering real-world results. OMRON, too, is not simply a company that sells sensors or PLCs. We exist to take responsibility for the outcomes achieved at our customers' production sites. I felt a strong alignment in this customer-centric mindset. That is my answer to the question, why OnLogic? That is precisely why I believe that combining OMRON's control and sensing technologies with OnLogic's computing and implementing capabilities will generate tremendous value. I am convinced that this partnership will allow OMRON to significantly expand the value we deliver to manufacturing sites around the world. That is all from me. Thank you very much.
Now, we'd like to move on to the Q&A session. Firstly, from the investors and analysts, we would like to take questions.
If you have questions here, please raise your hand, and if you're participating via the web, please press the raise hand button. If you are participating by phone, please press the star button and nine on your phone. I will call on you when it is your turn to ask a question, so please unmute your microphone and speak. To allow as many people as possible to ask questions, we ask that you limit your questions to two per person. Please note that questions will be limited to those related to today's presentation. Also, we are currently in a quiet period, so we will not be able to answer questions regarding the term's performance. Thank you for understanding. Firstly, questions from the floor.
Isayama-san from Goldman Sachs, please.
Thank you very much for your continued cooperation. Thank you very much. Isayama is my name. You are going to do this. I was listening to the presentation. In Yamanishi's presentation, I wanted you to tell me more about OnLogic. The growth rate and so forth, of course, compared with Advantech, growth is very high and profitability is very good. In the slides, of course, you said that those are the strengths of OnLogic. A high growth company, because company is small, or it is concentrating in a specific field, and it is concentrating in North America. Of course, a qualitative way you explained, but compared with major companies, this company looks so good. Can you talk about a more quantitative explanation why OnLogic?
Thank you very much. Yamanishi answers your question. Quantitative data, there are certain segments that we are not able to show, but I think there are two major points, strengths. Market situation, AI is penetrating, and cloud data is now more treated in an implementing way. There is a very major trend, and this company is following on that current, especially GPU and NPU installed, the agentic computing, the sales is increasing.
I said that this company is flexible, responding to the environment of customers. They can show a lot of configurations, GPU, NPU, when the neutrality is secured. Regarding that, flexibility is imperative. GPU in two years, the generation will change. But they have a very solid design philosophy, so they can show optimal configuration depending upon the demands of the customers, and the optimal GPU and NPU can be presented. I think that is the uniqueness of this company. AI is penetrating, so it is a multiplying factor. That is why this company is growing. The second point is this. This company has a unique positioning. Major IPC manufacturers are using the massive marketing, using the marketing channels. On the other hand, the completely customized players are there.
This company is in the intermediate position, so they can offer the optimal solution to the customers. This is the competitive advantage of this company. These two factors are multiplied in securing this position right now.
There has been some time since the president has changed, but will the management remain this time?
As explained in my previous presentation, management is really good, and the operation foundation to be built on an integrated basis, that has been achieved by the current management. So the management will remain, and with the incentives designed, we would like to have the management to remain.
The second question. Page 18, level one, two, three , you explained the steps. It is very convincing, and it is the perfect fit, I felt.
You were searching North America, that is why OnLogic, or industrial PC was searched and you came upon OnLogic. I am very interested in the process of why you found OnLogic. I do not know whether this is applicable, but at a glance, operating EBITDA about 20 x or so, I thought. I think advantage number is compared. Again, synergy formation, why have you decided on OnLogic? You cannot talk about the pricing, but can you collect the investment eventually? Difficult to say, I know, but Mr. Tsujinaga talked about it, and he talked about Cognizant in the past. What was the order of things in making the decision of this acquisition? What was the process which led into the acquisition this time? Can you talk about it?
Yamanishi answering that question.
Totally different viewpoint was taken for strengthening North America and global manufacturing, and requires data utilization, and we wanted to multiply AI with that. There were totally different needs. In the final analysis, we came upon OnLogic. That is what happened, actually. IAB, in the medium roadmap, very clearly North America was looked at, and that was the direction the customer base that would be enlarged, and then we wanted to obtain customers in a new domain. We were searching for a partner. On the other hand, I will repeat what I said, there is a global manufacturing needs of data utilization. From that perspective, we were searching for partners. These two were sort of multiplied. Regarding recovery of investment, there is a high probability with our business plan.
First of all, IPC market, as we said in the presentation, on average 13% per annum growth, and OnLogic is above the market trend in their growth. We wanted to have higher probability of implementation. Synergy effect, going forward, cross-selling in North America is the domain where we can be effective, and PLC and IPC multiplication will come effective in the latter part of the medium term. We have a high timeframe probability in our plan in planning for the collection of investment. Thank you.
Sorry to ask you again, but when Cognizant I was able to know how this can be filled in, but this time, how others can be filled in, I think you are going to be showing in your roadmap, but do you think everything is prepared right now, or do you think there are others that needs to be filled in?
How do you think about that?
The physical AI world that we are aiming for, the execution foundation for that, we already have them. That is how I think. We have the core part of that. Furthermore, what we have to think about is how to fit this into the challenges that our customers are facing. We think there is still some capability that we need, like for example, the area of AI models, particularly for the OT area, with the fusion of IPC and PLC, the AI that is actually going to be implemented, that will be needed. Also the physical AI, not just for the process, but in order to expand to the factory as a whole. MES, and also the factory intelligence that will combine with that will be required as well. With the combination with these players, that will be required further going forward.
There is a thinking of acquiring on 100% basis, but also there can be ways to be partnering on a flexible manner. There are various partners that OnLogic has. By utilizing those assets as well, we would like to respond to the needs of the individual customers. That is how we think.
Thank you very much. I understood very well. Thank you.
Next question, please. Daiwa Securities, Okawa-san.
Thank you very much for this opportunity. Okawa of Daiwa Securities. Two points. First point, M&A, this project. How you produce a synergy in 2015, 2017, North American companies acquired, and the companies are doing well, not doing well. If are not doing well, how are you going to change it for this project at this time? Speaking about the past M&A experiences, what is your thought about it?
Thank you very much. Yamanishi responds to your question. Up until now, M&A, what is different this time? In one word, in the past, our M&A, OMRON Group, they joined OMRON Group, and then they become stronger. That was the objective. This time, already strong company is going to be invited to OMRON Group.
That is clearly different from our past M&A cases. Strong company has assets and capability. We will retain them as they are. Having done so, how do we cooperate in creating new values? That is the big difference from the past M&A projects. In this context, the customer bases cross-selling therefrom, I explained during the presentation. It is not starting from scratch. It is already made. In the short term, we will expect a synergy effect by the two companies. After that, by joint development, the control technology and IPC data utilization technology would be combined therefrom, and then new values would be created, and we will prepare for the latter half of our campaign. Already strong is being utilized. This is the biggest difference.
Thank you very much. Second point, regarding the cross-sell. To the OMRON customers, introducing OnLogic's IPC, I understand about that, but I think there is going to be a bar as to have the products to be used by the other's customer, and also by connecting PLC and IPC. With that importance growing, there is more possibility for OMRON's products, or was that the reason for the acquisition, or is there any strategy to have IPC's products to be purchased by OMRON's customers?
Thank you. Computing without the data cannot be processed. In terms of collecting data, the advanced technology of OMRON is going to be truly important. Our advanced technology is very wide in scope. Therefore, for example, at the manufacturing site, not just the products or inspection data, but rather we would like to collect the information through our sensing technology.
With IPC and the sensing to be combined together, that I think is where we can start from. In addition to that, I talked about FA, but other areas, like for data center infrastructure I talked about, already at the data centers, heat processing, or in order to cool down the heat to inspect the flow or the monitoring of the power to be provided, we have already been providing solution for that purposes. OnLogic edge computing or edge server have already been provided by OnLogic in this area. Data collection and also the solution that we can provide, I think that is a great combination. Therefore, whether FA or non-FA, their customer base, there are products that we can provide or packages that we can provide. We already have them ready, so we want to promote that.
Thank you very much. Supplementary. IPC is something that you have been exerting a lot of efforts in the past, but the PLC and IPC did not go hand in hand so smoothly. With the acquisition of OnLogic, the process will accelerate. OnLogic's technical capability would bring in the difference. Maybe that was the difference?
Yes, IAB has IPC, but when it comes to controlling, developmentally, we have created IPC. So basically, it is high speed and high precision controlling, plus data information utilization. It is combined. On the other hand, IPC is more generic, and the customer's Gemba environment has to be taken into consideration and flexibly, configuration has to be changed. So the defense field is broad. OMRON has IPC already, and then a new OnLogic IPC would be not negating each other, but it is supplementary with each other. So IPC portfolio will expand.
Our IPC portfolio will expand further.
Thank you very much. Next question. Inoue-san from Citi Securities.
Thank you very much for the presentation. I am Inoue from Citi Securities. There are two questions that I want to ask. The first is the valuation for the acquisition this time. You had explained that ROI or hurdle rates, I thought I heard that you had a very high bar for that. The valuation on a quantitative basis, what was the assumption that you had made for the valuation and the hurdle rate? What specifically you had thought about, what is the payback period, within which time frame? What are they?
Takeda, CFO. I would like to explain. In OMRON, we have an investment committee, and their business synergy and the acquisition price, including the third-party evaluation, we work on the evaluation. I cannot talk about the detailed numbers, but the capital cost, the IRR has to be higher than our capital cost, and also the EBITDA multiple, is it within the range of the average of the industrial sectors that we looked into and have stepped out for the acquisition.
Thank you. If possible, what company was the benchmark, and how did you look at the average of the industrial sector? There are also IPC companies like Advantech, or there are other various companies as well.
We had referred to the multiples of those companies for the acquisition this time.
Second point. Page 20, synergy effect. Can you supplement quantitative explanation? I would like revenue and cost reduction would be the synergy effect that you can expect. If possible, can you talk about the scale of monetary unit? For example, at FY 2026, 2028, FY 2030, can you talk about specific numbers?
Yamanishi will respond. Concretely, the quantitative number of synergy effect is not something that we can show you. FY 2030 is the time horizon, and then OnLogic has a unique strength, and they have unique growth. That will be the major base of our expectation. Cross-selling, North American cross-selling would come on board at earlier time frame. In the latter part, fiscal 2030 and so forth, PLC, IPC's fusion would bring about new value for us. That is the synergy effect that we can expect. OnLogic itself has a specific independent growth, and that is a very relevant element.
Thank you very much. Sorry for supplementing. Cost side, cost reduction synergy, do you have anything specific that you have on your mind?
As of now, cost synergy is not something that we have a concrete plan. Because, as I said earlier on, they are already strong. They are already competitive. They have competitive operating system. So for the time being, we will capitalize on that. Having done so, OMRON's capability, OMRON's assets would be added, and then they can become even better and even stronger. If possible, we can collaborate together. Then, of course, in that context, cost synergy will come up if it is possible. Of course, we want to be positive about it.
Thank you very much. That is all for me.
Due to the interest of time, this question will be the last one. Fukuhara-san.
I am Fukuhara with Capital Securities. My first question is about this company, OnLogic. The sales and profit ratio are written here, but the cash generation of the balance sheet, what kind of company is it from that perspective?
I would like to answer for that. In terms of free cash flow, $10 million on an annual basis, on an average basis, stable free cash flow is being generated by this company. Would that be okay as a response?
Yes. Thank you. The second question is slide 14, about the FA domain, but the timeline for expanding to areas other than FA, how do you think about that?
Yamanishi will respond to that question. Firstly, on this point, we are not incorporating this into our specific business plan yet. So when we will be deploying from a specific timeline, we do not have a specific timeline or milestone yet. But when it comes to data center, we are already providing solutions on an individual basis, so that we should be able to do very soon. Also, us and the OnLogic solution combination, we would like to deploy after PLC.
Well then, ladies and gentlemen, this will complete the question -and -answer session for investors and an-