M&As (business succession-type transfers) are on the rise to address the lack of successors facing Japanese small—and medium-sized companies. However, as the number of M&As increases, trouble will likely occur. This is also a concern for our firm, which handles micro M&A.
This article describes the background and countermeasures for problems in M&A for SMEs.
Formulate and Revise Guidelines for SME M&A
The Small and Medium Enterprise Agency established the Business Succession Guidelines in 2015; the second edition was revised in 2020. The guidelines’ purpose is to support smooth M&A of SMEs without successors. They provide procedures, the roles of users, and what to do in case of problems.
Background of Guideline Revision
With the expansion of the M&A market for small and medium-sized enterprises (SMEs), the number of specialized firms and the opacity of their contracts have become issues. In response, the second edition of the M&A Contracts Manual has added measures to increase contract transparency by clearly stating the criteria for fees and compensation amounts.
Revisions to the Third Edition
The third edition, published in August 2024, further strengthens the guidelines. The following points have been added.
- Enhanced Confirmation of Services and Fees: This section clarifies the specific services provided by M&A intermediaries and their fee structure to prevent potential problems.
- Additional risk explanations: The contract clearly states risk information and strengthening measures to prevent future problems.
- Measures to deal with contractual problems: Specific measures are provided for common issues such as unclear contractual content, delay or non-performance, and breach of confidentiality.
M&A Support Organization Registration System
Based on the “Small and Medium M&A Promotion Plan” launched in April 2021, a registration system for M&A support institutions has been introduced. Under this system, support institutions wishing to register must comply with the guidelines and are supported in selecting reliable intermediaries/FAs through the database of registered institutions.
Our firm is also registered as an M&A support organization, Senmusubi LLC, and we provide safe and highly transparent M&A support.
Summary
M&A is an essential means of business succession for small and medium-sized enterprises (SMEs), but the increasing number of M&A transactions is causing various troubles. We aim to achieve secure business succession by using guidelines and selecting reliable support organizations.