Japan, which experienced the aging of small-business owners before South Korea, saw the number of completed SME mergers and acquisitions grow roughly 20-fold in about a decade after introducing policies to promote corporate M&A. Photo is unrelated to the article. [Ministry of SMEs and Startups]
Japan, which experienced the aging of small-business owners before South Korea, saw the number of completed SME mergers and acquisitions grow roughly 20-fold in about a decade after introducing policies to promote corporate M&A. Photo is unrelated to the article. [Ministry of SMEs and Startups]

Private SME M&A deals in Japan: 260 in 2014, 4,940 in 2024

47 regional succession support centers cover everything from deal sourcing to post-merger integration

South Korea, modeling its system on Japan's, ramps up support this year

As the aging of small-business owners emerges as a pressing social issue in South Korea, Japan's success story is drawing renewed attention. The number of small and medium-sized enterprise mergers and acquisitions in Japan has surged nearly 20-fold over the past decade, helping bring down the average age of SME owners. The Japanese government credits a combination of a nationwide business succession support network, intermediary oversight, and financial and tax incentives for driving that market expansion.

Japan's completed SME M&A deals near 5,000 in 2024 — 19 times the 2014 figure

At the second Korea-Japan SME Economic Forum held Wednesday at the Korea Federation of SMEs in Yeouido, Seoul, Saeki Norihiko, director of the management support division at Japan's Small and Medium Enterprise Agency, presented an overview of Japan's SME M&A landscape in a session titled "SME Policy in an Era of Economic Transformation." His presentation materials, obtained by The Herald Business, covered the government's M&A support framework as well as side effects that emerged during implementation.

"It is important to transfer management resources to successors with a strong drive for growth through M&A and business succession, and to enhance companies' ability to generate profit," Saeki said in the presentation. "To that end, the Japanese government operates a comprehensive support system combining legislation, tax measures, support institutions and subsidies."

Japan, which confronted the aging of small-business owners before South Korea, has focused since 2014 on using SME M&A to improve business continuity. As a result, the number of deals completed by private M&A intermediaries rose from 260 in 2014 to 4,940 in 2024 — a roughly 19-fold increase over a decade.

Over the same period, completed deals handled by public business succession support institutions climbed from 102 to 2,132, an approximately 21-fold increase. The Japanese government points to a policy mix of a nationwide succession support network, intermediary management, and financial and tax incentives as the drivers behind that market growth.

The expansion of the business succession market has also shifted the age distribution of Japanese SME owners. The concentration of owners in their 60s, which once dominated the distribution, has been gradually flattening. "By channeling resources to capable managers through M&A and business succession and actively supporting successors with a strong appetite for growth, we are realizing improved profit-generating capacity," Saeki said. "There was a period when owners in their 60s made up the largest share, but the curve has been flattening since then."

'We go to them' — Japan runs 47 regional public succession support centers

The starting point of Japan's business succession policy is identifying companies without successors early. Officials concluded that waiting for owners to list their businesses on M&A platforms was not enough to uncover the latent succession needs of aging entrepreneurs. Japan has established business succession and handover support centers in all 47 of its prefectures, operating a regional consultation network in which local support institutions carry out programs initiated by the central government.

Regional financial institutions, chambers of commerce and industry associations leverage their existing relationships with SME owners to assess succession needs — checking whether a successor exists, when the owner plans to retire, and whether passing the business to a family member or employee is a possibility. This approach does not wait for companies to seek help; instead, it proactively identifies succession needs and connects businesses with public support centers. "This method is what we call a push-type business succession diagnosis," Saeki explained.

Once a willingness to transfer ownership is confirmed, the center walks the owner through available options — succession within the family, transfer to an employee, or a third-party M&A. For companies seeking an outside buyer, the center assists with identifying and matching acquisition candidates and drawing up a succession plan. Consultations and basic support at public centers are in principle free of charge. When specialized legal or accounting review or deal brokerage is needed, the center connects the business with private professionals.

South Korea also modeled its own system on Japan's business succession framework when it was first introduced. However, a significant obstacle remains: the government only recently shifted its policy focus from promoting family-based succession to encouraging corporate M&A, and less than a year has passed since that transition began. "In Japan, dedicated staff are assigned individually at the local government level, enabling close-knit management," said one domestic business succession expert. "South Korea is still in the early stages of policy implementation, and the reality is that replicating that model is no easy task."


hong@heraldcorp.com