Mr. Shunsaku Sagami personally witnessed the growing problem of succession among entrepreneurs in Japan, a country that is grappling with an aging population.
To address this issue, the 32-year-old entrepreneur developed a solution that involves utilizing a proprietary database and artificial intelligence (AI) to facilitate deals for small and medium-sized companies, particularly those founded by individuals who are approaching retirement.
Since its listing on the Tokyo stock exchange in June of last year, Sagami’s company, M&A Research Institute Holdings, has experienced a remarkable sevenfold increase in value.
This surge has elevated Sagami’s personal wealth to approximately US$950 million (S$1.27 billion), according to the Bloomberg Billionaires Index.
Sagami attributes the inspiration for his business idea to his grandfather, who spent his life managing a small real estate agency in Osaka.
Unfortunately, his grandfather had to close down the agency when he retired in his 80s due to the inability to find a successor. Recalling the sentimental moment when his grandfather’s real estate license was taken down and discarded, Sagami felt a deep sense of sadness.
In an April presentation, M&A Research Institute highlighted that an estimated 620,000 profitable businesses in Japan are at risk of closure due to the lack of successors.
Furthermore, the government projects that by 2025, there will be 2.5 million small and medium-sized enterprises whose owners are over 70 years old.
Alarmingly, about half of these businesses have no succession plan in place, which could result in company shutdowns, the loss of 6.5 million jobs, and a negative impact of 22 trillion yen (S$216 billion) on the country’s gross domestic product.
Tim Morse, the director of Asymmetric Advisors, a firm that provides recommendations on Japanese equities, noted the significant number of small companies with aging founders who lack obvious successors and are increasingly open to selling their businesses. He also pointed out that the cultural perception of selling one’s business is changing, as it is now seen as a more favorable option.
Since its establishment five years ago, M&A Research Institute has experienced significant growth, currently employing over 160 individuals, including approximately 115 advisors.
Rise of a 32-Year-Old Entrepreneur Using AI
The institute has around 500 ongoing deals and successfully closed 62 transactions in the six-month period ending in March, a notable increase from 26 deals during the same period in 2022.
Sales have more than doubled, reaching 3.9 billion yen, compared to a modest 376 million yen in the fiscal year ending September 2020.
Mr. Sagami, who owns 72 percent of M&A Research Institute, had a strong desire to build his own business from an early stage. To acquire diverse skills, he worked in various roles such as designer, software developer, and marketing officer. Before achieving his first breakthrough in 2016, he made attempts at establishing an e-commerce company and a tutoring firm.
His breakthrough came with the creation of Alpaca, a women’s fashion and make-up business named after the South American animal known for its high-quality wool. Remarkably, Sagami accomplished this at the age of 25.
In 2017, Alpaca was acquired by the public relations agency Vector. However, Sagami found the acquisition process to be lengthy and inefficient.
As a result, he developed an AI algorithm inspired by Japan’s automation machinery maker, Keyence Corp. The algorithm’s purpose was to match buyers with sellers and simplify administrative procedures and paperwork.
Unlike traditional mergers and acquisitions consultants, who often rely on regional banks for connections and compete with one another for deals, M&A Research Institute leverages its extensive database to facilitate matchmaking. The institute primarily focuses on companies with sales up to 500 million yen.
In the quarter ending in December 2022, the M&A Research Institute generated a net profit of USD 7.1 million from a revenue of USD 15.7 million.
In the fiscal year ending in September 2022, the company’s annual sales experienced an impressive nearly 200 percent year-on-year growth, reaching USD 28.8 million.
Simultaneously, its profit increased almost fourfold to USD 9.8 million. By the end of December, the number of M&A advisors within the company had more than doubled, reaching a total of 90.
