In Japan, you typically source M&A deals through brokers (chukai-kaisha). Whether Nihon M&A Center or M&A Capital Partners or Strike, they like to call themselves "M&A Consultant" or "Financials Advisor" or other elitist, fancy names.
But in essence, they are matching agents that should most accurately be described as "brokers".
Let's say you as an institutional or individual investor want to acquire a company in Japan. What you do is to tap the 5 to 6 major brokers and tell them what you are looking for. There is no statistical study available, but typically 95% or more of your deals would get done through this broker channel. The other 5% would come from your own sourcing, like your independent filtering of publicly traded companies or intro by your friends and business partners.
But even with the brokers, the process is not as simple as it sounds. The buyer with (i) the reputation for swift investment decision and (ii) a track record of actually having closed many deals, will naturally get the preferential treatment. Brokers loathe wasting their own time and energy, and do their very best to avoid it. This, in turn, is a result of a set of financial incentives under which each broker operates.
According to the insider I've talked to, young brokers are paid a very low fixed monthly salary (to the tune of 300,000 JPY, or $2000 USD) coupled with a big bonus for each deal closed.
Typical Japanese brokers charge 5% of the deal value (with some staggered discounts for a larger deal) with a minimum floor of 25 million JPY in commission per deal. Since they charge this from both the seller and the buyer, the broker makes a minimum of 50 million JPY per deal. The employee in charge of the deal, it is said, gets 20% or more of that as a bonus.
In Japan where inflation is now rampant, brokers subsist on the deal-by-deal bonuses. Conversely, if you cannot close deals, you quit your job in no time. Not because you get fired, but because you cannot pay your bills. In a country where the labor law makes it very hard to terminate ill-performing full-time employees, this payment structure allows for a natural metabolism of weeding out the bad.
So much so that, when one investment fund told a broker that a deal closing would be delayed due to some important logistical reasons, the broker reacted "But, what about my bonus for this season??"
This fund later aptly described the M&A brokers in Japan as NOT financial professionals. Rather, they are a independent-minded group of sales people focused on persuading the sellers to make up their mind and matching them with buyers.
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