Business Succession

Business succession has several merits for the owner/family and the management

1.
A clear purpose
  • Agreement is made based on discussions between owner/family and management
2.
The owner can
sell at
an appropriate
price
  • Listed shares：not influenced by drop in share price that comes with large lot sales
  • Unlisted shares：based on methodological valuation of company’s fair value
3.
The management
can acquire
the company
with a relatively
small amount
of its own funds
  • Under the finance scheme, with fund investment, self-funding by management can be small
4.
Establishment of
a structure aimed
at improving
corporate value for:
  • Implementing highly agile management
  • Flexible allocation of mid-term management resources
  • Strengthening of competitiveness through utilization of external know-how
5.
The employees
can grow as
the company grows
and efforts
will be rewarded
  • Corporate value improvement/company growth will be directly linked to capital gains
6.
Strengthening of
management
and employee
morale
  • Incentives to succeed will be introduced
  • Awareness, in a positive way, of being observed by a third party

Background for choosing a sale to a fund for business succession

－Comparison between a sale to a fund and sale to a business company－

  Sale to a Fund   Sale to a Business Company
Investor Buyout fund   Competitor in same industry; large conglomerate aiming to break into new market
Investor Motive To increase corporate value by cooperating with management and strategic partners, and to generate cash flow and realize a high return for investors   To expand their own market share
Investment Period Usually 3-4 years with exit via IPO or M&A   No exit planned
Fundraising Finance acquisition cost through various financing methods   Finance acquisition cost through proprietary funding or share exchange
Management
The controlling interest is seized by the fund but the daily operations are entrusted to the management of the acquired company
   It is the norm for the new owner to take full control away from the existing management of the acquired  company
Business Continuity
Business development through independent strategy is possible
Maintenance of the company name and culture is possible
Business continuity is possible for the management after the investors sold their stake for investment return.
   Business development as one part of the owner’s strategy
Difficult to keep the company name and culture
The company will be integrated with the owner’s other business and if the business department is incompatible with this it may be reorganized or sold

Compared with sale to a company, business continuity will be secured through keeping the existing management and the unique company culture.

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