On March 22nd, the TOB (take-over-bid) of Orion Breweries Ltd. by the SPC (special purpose company), “Ocean Holdings Ltd.” established by Nomura Holdings Inc. and The Carlyle Group was completed. In a press release dated January 23rd, Orion expressed its assent for TOB, stating that it wants to “keep its DNA as a company with its roots in Okinawa, whilst pursuing new and further growth”. With their new company structure, they will look to reconstruct their beer business, as well as fortify their business in hotels and real estate. For the exit strategy of their funds, they mentioned that “IPO (Initial Public Offering) will be an option as well”.

On March 25th, with the formation of hostile TOB in the background, confrontation was settled when Descente Ltd., who were required to reform their management including the retirement of Mr. Ishimoto, the president from the founding family, announced that it will accept all of Itochu Co. Ltd.’s requests. Descente will look to restructure their management strategy, fortify their growth strategy under Itochu Co. Ltd. with their Chinese business as its pillar, and improve its revenue structure that relies heavily on their Korean business.

On the other hand, there was a big movement in the Tohoku region as well. With poor sales performance that continued over the years, “Onuma”, a department store with a long history in Yamagata Prefecture became a fully-owned subsidiary of “Milestone Turnaround Management” (MTM), a business reconstruction fund, after accepting its investment.
However, with the misappropriation of funds and the rumours floating around on the instability of MTM’s business, the reconstruction of Onuma did not progress as expected. The local financial community who were all fed up with the situation supported the establishment of SPC by the employees, and on the 22nd, retrieved back the management rights after receiving the credits (with Onuma stocks as collaterals) which were initially for MTM.

These three M&A all have different schemes and objectives, with Orion Breweries Ltd. through growth support with funds, Descente through business cooperation, and Onuma through business reconstruction by EBO (employment buy-out). With Orion, the situation can also be considered an MBO by its management. However, common through all of them are the reformation of management and reconstruction of their growth strategy with external capital.
There will be 2.45 million company executives over the age of 70 in the next 10 years, 1.28 million of whom do not have successors. Under such situation, over half of the companies who currently have no choice but to shut its business down are in a surplus, and if left this way, there will be 6.5 million people who will lose their jobs by 2025, leading to a potential loss of 22 trillion yen in GDP.

If you take into account the size and background of the three examples above, it may be “irrelevant” for many small-medium enterprises. Even so, there is no difference when looking at in the broader perspective of continuing businesses to the future. Business succession is an urgent issue for the Japanese economy to maintain its current vitality, but it’s also evident that there is a limit to business successions by relatives. There are issues with personal guarantees and inheritance. Therefore, the structuring of funds in response to the necessity of diverse business successions, and a system in which opportunities are given to those who (non-relatives) can draw out new business strategies is urgently required.

Takashi Mizukoshi, the President