Take Five #046: Japan’s business owners are giving away their companies, and more
Take Five #046: Japan’s business owners are giving away their companies, and more
Top five must-reads this week in the world of SMB acquisitions and operations
Subscribe to Take Five to get our top 5 quick weekly reads on the world of SMB, M&A, and EtA from the team at Kumo. Kumo aggregates hundreds of thousands of deals into one easy-to-use platform so that you can spend less time sourcing, and more time closing deals.
Take Five is created and sponsored by Kumo, a powerful deal aggregator to help supercharge your deal sourcing at withkumo.com.
What can you do with Kumo?
Browse 120,000+ deals from hundreds of brokers and every major marketplace, with 700+ unique deals added daily.
Save time and stop reviewing duplicate deals. Kumo matches identical deals across hundreds of sources so you can view unique business opportunities, even if they’re slightly different across different websites.
Get a daily email for deals that match your search criteria
Take Five #046: Japan’s business owners are giving away their companies, and more
1. The 8 step plan of how to transition on Day 1 of SMB ownership
2. “We executed the LOI on September 30, 2022 and closed on March 6, 2023... 157 days.”
Some takeaways from someone who closed on a deal within a year of starting their search:
We executed the LOI on September 30, 2022 and closed on March 6, 2023... 157 days. We've owned the business for almost 4 days. No real surprises... but maybe its still early in the process! The main thing is that we got it done. The best thing that we did was hire a management team that could focus on the project 100% and a M&A firm that was top notch. We have raised $3 million and would like to create more runway with a total equity raise of $5 million. This is an early stage company with lots of technology commercialization to do, not your typical enduringly profitable 30 year old firm. What we've learned is that products were installed, proof of concept was developed, and unfortunately, the sellers never followed up. That was next to impossible to learn in the due diligence process, but we were able to discern that and somewhat expected that. Now we are reacting to feedback from a place of listening and empathy. That has won a lot of goodwill for follow up and making things right. Will keep you updated on that one.
From “1st Deal Done - Lessons Learned” on Searchfunder
3. The biggest differences between being a Search CEO vs. a SMB Owner
It’s just me, growing this family-owned business, taking care of my employees, and doing right by customers.
I still have my issues with self-funded searching as a model (future thread), but I’m a big fan of the independence, wealth creation, and impact that it can facilitate. It’s not for everyone, but it’s definitely for more people than you might assume.
4. A survey of 2022’s dead deals and broken LOIs
From “Unpacking 2022’s Dead Deals and Broken LOIs” by Axial:
On Axial’s lower middle market deal sourcing platform, we saw slightly elevated LOI breakage rates and lower average deal sizes and decided to study it. We are grateful to the surveyed Axial members who provided both data and useful color on what in their eyes broke the deal. The below results were compiled and anonymized based on the 48 received replies.
Somewhat surprisingly, macro events weren’t the main event, although they likely raised the stakes and created more price discipline with buyers. Debt financing / availability was not the issue either, despite it being discussed ad nauseam by the financial media.
The main event was an all too familiar mix of seller financial under-preparedness, unsuccessful renegotiations post-diligence, and seller cold feet.
5. Interesting NYT read: “Japan’s Business Owners Can’t Find Successors. This Man Is Giving His Away.”
Pulled out some choice sections from this NYT article about why Japan’s small businesses struggle with succession:
Hidekazu Yokoyama has spent three decades building a thriving logistics business on Japan’s snowy northern island of Hokkaido, an area that provides much of the country’s milk.
Last year, he decided to give it all away.
One of the biggest obstacles to finding a successor has been tradition, said Tsuneo Watanabe, a director of Nihon M&A Center, a company that specializes in finding buyers for valuable small and medium-size enterprises. The company, founded in 1991, has become enormously lucrative, recording $359 million in revenue in 2021.
In 2021, government help centers and the top five merger-and-acquisitions services found buyers for only 2,413 businesses, according to Japan’s trade ministry. Another 44,000 were abandoned. Over 55 percent of those were still profitable when they closed.
From “Japan’s Business Owners Can’t Find Successors. This Man Is Giving His Away.” on the New York Times
Upcoming Events in the SMB & Business Acquisition Space
(A ✨new✨ section in our newsletter: we’ll be adding to this list weekly, so send over any events you think we’ve missed!)
March 23, 2023: The Wharton ETA Summit 2023 is hosted on 3/23 in Philadelphia, PA (link here).
Loved what you read? Subscribe to Take Five to get our top quick reads every week from the team at Kumo. Kumo aggregates thousands of sources into one easy-to-use platform so that you can spend less time sourcing, and more time closing deals.