Take Five #046: Japan’s business owners are giving away their companies, and more
Codely v2.0 public release is here
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What has changed in our latest release?
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All new features available for all public channel users
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Coding collaboration with over 200 users at once
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Real-time code save every 0.1 seconds
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Take Five #046: Japan’s business owners are giving away their companies, and more
1. The 8 step plan of how to transition on Day 1 of SMB ownership
2. “We executed the LOI on September 30, 2022 and closed on March 6, 2023... 157 days.”
Some takeaways from someone who closed on a deal within a year of starting their search:
We executed the LOI on September 30, 2022 and closed on March 6, 2023... 157 days. We've owned the business for almost 4 days. No real surprises... but maybe its still early in the process! The main thing is that we got it done. The best thing that we did was hire a management team that could focus on the project 100% and a M&A firm that was top notch. We have raised $3 million and would like to create more runway with a total equity raise of $5 million. This is an early stage company with lots of technology commercialization to do, not your typical enduringly profitable 30 year old firm. What we've learned is that products were installed, proof of concept was developed, and unfortunately, the sellers never followed up. That was next to impossible to learn in the due diligence process, but we were able to discern that and somewhat expected that. Now we are reacting to feedback from a place of listening and empathy. That has won a lot of goodwill for follow up and making things right. Will keep you updated on that one.
From “1st Deal Done - Lessons Learned” on Searchfunder
3. The biggest differences between being a Search CEO vs. a SMB Owner
It’s just me, growing this family-owned business, taking care of my employees, and doing right by customers.
I still have my issues with self-funded searching as a model (future thread), but I’m a big fan of the independence, wealth creation, and impact that it can facilitate. It’s not for everyone, but it’s definitely for more people than you might assume.
4. A survey of 2022’s dead deals and broken LOIs
From “Unpacking 2022’s Dead Deals and Broken LOIs” by Axial:
On Axial’s lower middle market deal sourcing platform, we saw slightly elevated LOI breakage rates and lower average deal sizes and decided to study it. We are grateful to the surveyed Axial members who provided both data and useful color on what in their eyes broke the deal. The below results were compiled and anonymized based on the 48 received replies.
Somewhat surprisingly, macro events weren’t the main event, although they likely raised the stakes and created more price discipline with buyers. Debt financing / availability was not the issue either, despite it being discussed ad nauseam by the financial media.
The main event was an all too familiar mix of seller financial under-preparedness, unsuccessful renegotiations post-diligence, and seller cold feet.
5. Interesting NYT read: “Japan’s Business Owners Can’t Find Successors. This Man Is Giving His Away.”
Pulled out some choice sections from this NYT article about why Japan’s small businesses struggle with succession:
Hidekazu Yokoyama has spent three decades building a thriving logistics business on Japan’s snowy northern island of Hokkaido, an area that provides much of the country’s milk.
Last year, he decided to give it all away.
One of the biggest obstacles to finding a successor has been tradition, said Tsuneo Watanabe, a director of Nihon M&A Center, a company that specializes in finding buyers for valuable small and medium-size enterprises. The company, founded in 1991, has become enormously lucrative, recording $359 million in revenue in 2021.
In 2021, government help centers and the top five merger-and-acquisitions services found buyers for only 2,413 businesses, according to Japan’s trade ministry. Another 44,000 were abandoned. Over 55 percent of those were still profitable when they closed.
From “Japan’s Business Owners Can’t Find Successors. This Man Is Giving His Away.” on the New York Times
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