Acquiring a business in Japan

Why businesses come to market

In Japan, a large share of small and mid-sized companies change hands because the owner is approaching retirement without a successor, rather than because the business is in difficulty. The seller a buyer meets is therefore rarely a purely financial one. Alongside price, such an owner is usually thinking about what becomes of the staff, whether long-standing customers will be looked after, and whether the name over the door will continue. For a buyer from Taiwan this is both an opening and a demand. Few counterparties combine capital with a genuinely long horizon; but across the table it is not only the offer that is being assessed.

Two routes to acquisition

The first route is a purchase of shares. The company continues as the same legal person, so contracts, employees and licences generally stay where they are. The procedure is comparatively clean, though the buyer also inherits existing liabilities and whatever lies beneath them. The second is a transfer of the business itself, taking only specified assets, contracts and people. The perimeter can be drawn, but each counterparty must consent to its contract moving, employees are engaged afresh, and in some sectors a licence does not transfer and must be applied for again. Which route suits depends on the nature of the business, the licences it holds, and what the parties agree about risk.

How a transaction usually proceeds

• A confidentiality agreement, an initial information pack, and a first read of each side’s intentions
• A meeting with the owner to understand how the business actually runs and what handover is hoped for
• A non-binding indication of interest setting out a price range and the principal terms
• Due diligence across financial, tax, legal and employment matters
• Adjustment of terms in light of findings, then the definitive agreement and completion
• The transition after completion: the owner’s continued involvement, introductions to customers, and an explanation to staff

Points that bear on an overseas buyer

In certain sectors, an acquisition by a foreign investor may require prior notification under Japan’s foreign exchange framework. Whether it applies turns on the sector and the size of the stake, so it is worth confirming early rather than late. After completion, someone must actually run the business in Japan: the arrangements for the representative, continuity of banking relationships, and the way the change is explained to employees all bear directly on stability. Japanese employment practice also differs from Taiwan’s, and the latitude to adjust headcount or terms is narrower, which is better reflected in the valuation than discovered afterwards. Outcomes depend entirely on the particular case, and no process can assure one. We keep the timetable and the conversations in order; the diligence and the documents are handled by partner specialists with the relevant qualifications.

This note is general information and is not tax, legal, investment or immigration advice. The rules and procedures that apply differ by sector and by case, so any decision should be confirmed with qualified professionals in the relevant field.