Population trend delivers boost to firms
Advisers specializing in mergers and acquisitions for mostly family-run firms are enjoying a boom in Japan, as an aging, shrinking population brings in the boundaries on the country’s small business landscape.
There are no industry-wide figures for deals between 500 million and 1 billion yen ($4.4-$8.8 million), but boutique advisers say they are benefiting as owners look to merge their businesses to cope with dwindling demand or as they reach retirement without a successor.
Japan’s population, already the oldest among developed economies, is projected to shrink by a third by 2060.
Nihon M&A Center Inc, the largest of the three publicly listed boutique advisers, said on Jan 30 nine-month profit to end-December had risen by 34 percent to a record 5.3 billion yen on sales of 15 billion yen.
“Japan’s population is shrinking ... Ultimately none of the small companies will be able survive by itself,” said Yasuhiro Wakebayashi, chairman and founder of the company.
“They have to be part of larger firms to grow. That is going to be a trend in this country, so the M&A market will only become bigger.”
Nobuko Inui, 59, who owned four dispensing pharmacies in Osaka, western Japan, was among those helped by Nihon M&A.
Last year Inui sold the business she set up in 1994 to Tokyo-based, privately held Kraft Inc, which operates 630 pharmacies nationwide. Inui found it hard to stay competitive as the government cut drug prices to reduce mounting healthcare costs.
“Drugs stores are under pressure to improve and diversify our services, but a small company like mine could not afford to hire more pharmacists, so I decided to sell my business,” said Inui, who runs the pharmacies for their new owner.
But consolidation also provides a fillip to larger companies struggling to find organic growth.
Tokyo-based construction materials maker SE Corp is predicting a decline in net profit for the year ending March on rising labor costs, but one bright spot is a steelframe construction firm it bought for 230 million yen in 2015 from Hiroshi Morita.
The unit’s sales have grown about 40 percent to around 850 million yen since the acquisition.