The COVID-19 pandemic is forcing owners of small businesses in Japan to make difficult decisions on whether to close up shop or search for a successor.
Some 50,000 small businesses in the country closed in 2020, a record high, according to Tokyo Shoko Research Ltd., with the pandemic acting as the final nail in the coffin for many businesses already struggling to find successors to continue operations.
With the health crisis making it difficult to envision a business future, many are turning to outsiders to take over operations.
Masanori Yoshida, president of restaurant operator Zekkocho, took over the operations of a robatayaki barbecue restaurant in Sendai in August last year.
The previous owner, Kiyoshi Kato, 78, had planned to close the restaurant as he had been unable to find a successor. Yoshida, a regular customer, took it over, believing that it should not be wasted.
After the handover, the restaurant added new items to the menu aimed at young people, leading to an increase in customers.
Yoshida “is bringing in lots of business while preserving the culture of robatayaki,” Kato said.
But such success stories are relatively rare.
There were 348 merger and acquisition deals for business succession purposes in Japan in the first seven months of this year, a pace close to last year’s, when a record 622 were logged, according to M&A advisory firm Recof Corp.
About 577,000 small-business owners in Japan are believed to be looking for third parties to succeed operations due to their old age, with many considering closing otherwise.
M&A brokerage websites are looking to connect such business owners with potential buyers by listing information on businesses looking for successors.
Nishihara Shokai Co., a food wholesaler in the city of Kagoshima, used Bizreach Succeed to acquire a firm.
In October, Nishihara acquired the operator of a struggling members-only website for nutritionists. It aims to use information from nutritionists to offer recipes for hospitals and care facilities. It also began a staffing service linking nutritionists and food-makers.
Many hope that regional banks will play a role in linking businesses with potential buyers, due to their extensive knowledge of the local community.
“It is an opportunity for regional financial institutions to contribute to the continuation of local businesses while increasing revenue from commission fees,” said Koichi Sakurada, chairman of New Frontier Japan Investment Co., which focuses on small businesses.
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