Shunsaku Sagami, the 32-year-old founder and CEO of M&A Research Institute Holdings, a mergers and acquisitions brokerage, is Japan’s newest billionaire. Shares of the company, which specializes in M&As of small and medium-sized firms, have skyrocketed and are up more than 340% since its listing last June. Sagami’s 73% stake in the firm is now worth just over $1 billion, based on Friday’s closing price of ¥10,090 ($74.36).
Founded in 2018, the M&A Research Institute uses artificial intelligence to match potential buyers with companies that are typically facing the risk of closure, despite being profitable, because their owners are ageing and unable to find successors. Sagami’s company has become adept at closing deals quickly, taking on average just over six months to complete a transaction versus the industry average of a year. In the quarter ended December 2022, it concluded 33 transactions, with another 426 deals still in progress, according to its latest earnings report.
M&A activity has been soaring in Japan, hitting a record high of 4,304 transactions in 2022, according to Recof, a Japanese firm that tracks the M&A market. These range from big-ticket deals to the modest-size transactions that Sagami targets. Last year, U.S. investment firm KKR privatized Japan’s Hitachi Transport System in a deal valued at $5.2 billion. M&A Research Institute’s past deals include the sale of a ¥200 million (revenue) IT firm with no successor to a ¥1.5 billion (revenue) rival looking for expansion.
Shunsaku Sagami, whose first job was in advertising and not in high finance, was prompted by his own experience to venture into the M&A field. In 2015, he set up a fashion media company called Alpaca that was acquired by Tokyo-listed public relations agency Vector and later rebranded as Smart Media. Sagami, who was in his mid-twenties at the time, continued to work at the company and helped it to make further acquisitions.
While there, he spotted what he thought were inefficiencies in the dealmaking process, he wrote in a post on the M&A Research Institute’s website. Meanwhile, Sagami also witnessed his grandfather’s business being forced to close because there was no successor to keep it running. Sagami’s overarching goal was to help preserve Japan’s SMEs. More than 99% of all companies in Japan are SMEs and about two-thirds of them have no successors, according to Teikoku Databank, a financial research firm.
The M&A Research Institute deploys an AI-powered matching system to help search for potential buyers of businesses whose owners are keen to sell out. It charges a success fee, payable only when the deal is concluded. This client-friendly pricing system and AI-driven approach have given it an edge over the competition, the firm says.
The success spurred Shunsaku Sagami to take the M&A Research Institute public on the Tokyo stock exchange’s growth market in June last year, less than four years after the firm was founded.
The M&A Research Institute reported a net profit of $7.1 million on revenue of $15.7 million for the quarter ended December 2022. The firm’s annual revenue surged nearly 200% year-on-year to $28.8 million in the fiscal year ended September 2022, with its profit jumping nearly four-fold to $9.8 million during the same period. The number of M&A advisors in the firm has more than doubled to 90 by the end of December.
Finding that business owners who cashed out were asking the company how to invest their new-found wealth, Sagami has now expanded into asset management.