[Practical Guide to M&A Finance and Integration Processes] From mitigating financial risk through the maintenance of goodwill amortization to MT Genex's 1.8 billion yen acquisition of an electrical equipment company, the PMI case of Tomoe Corporation, and next-generation growth strategies for SME owners learned from Nidec's shareholder derivative suit

371_2026/7/22_『Next-Generation M&A Pictorial Book - Designing "Want to Sell and Want to Buy"

Today's Headlines

Extremely important decisions and concrete cases have been revealed one after another in the Japanese M&A market and corporate growth strategies.

First, the Financial Accounting Standards Foundation (FASF), which sets Japan's accounting standards, has decided to maintain the current standard of "periodic amortization," in which a fixed amount is expensed each period for "goodwill" generated by corporate mergers and acquisitions (M&A). This is expected to significantly reduce the financial risk that acquiring companies will be forced to record sudden and large impairment losses in the future, providing a strong tailwind that will encourage active M&A expansion by Japanese companies, especially small and medium-sized enterprises.

Against the backdrop of this financial peace of mind, dynamic M&A in practice is also becoming more active. MT Genex Co., Ltd. (Tokyo Stock Exchange Standard: 9820), which handles real estate and office renewals, announced that it will acquire all shares of Next Co., Ltd., an electrical equipment construction company with extremely solid performance, for approximately 1.84 billion yen and make it a subsidiary.

Furthermore, in the construction industry, in the acquisition of Reiwa Kensetsu by the listed company Tomoe Corporation, advanced PMI (Post-Merger Integration) support was provided by "Japan PMI Consulting" of the Japan M&A Center Group. A system is being developed to smoothly elevate Reiwa Kensetsu, which was a non-listed company, to the strict governance and internal control standards of a listed company, serving as a successful model that clearly shows that the success or failure of M&A depends not on the "contract" but on the "post-acquisition integration."

On the other hand, there are also movements that remind us of the importance of discipline and governance regarding M&A. At Nidec Corporation (Tokyo Stock Exchange Prime: 6594), it was disclosed that a shareholder derivative suit had been filed in connection with past management decisions. This strongly suggests that we are in an era where, no matter how excellent an M&A strategy may be, the transparency of the process and the fulfillment of the duty of care as a director will be strictly questioned after the fact.

Today, we will comprehensively unravel these four super-important themes that determine the success or failure of M&A: finance, practice, integration, and governance, and thoroughly explain the "next-generation M&A strategy" for SME owners to achieve sustainable growth by balancing "offense" and "defense."

Summary

What today's news shows is the fact that the management method of M&A has completely established itself not as a mere "money game by some large companies," but as the "most realistic and powerful option for business growth and business succession" for all small and medium-sized enterprises. In this article, we will comprehensively explain the following four important news items.

1. Decision to maintain periodic amortization of goodwill (Financial Accounting Standards Foundation: FASF) Unlike the "non-amortization" (performing tests every year and taking a lump-sum impairment when value drops) adopted by International Financial Reporting Standards (IFRS) and US GAAP, the "amortize equally every period" mechanism that Japanese standards (J-GAAP) are proud of will be maintained. This prevents the risk of "goodwill" accumulated on a company's balance sheet suddenly attacking as a huge impairment loss. Especially for companies that continuously conduct small and medium-sized M&A, it can be said that future profit and loss forecasts have become extremely easy to make, and the foundation for making sound investment decisions has been protected.

2. M&A of electrical equipment company Next by MT Genex MT Genex acquired "Next," which has excellent profitability with sales of 1.6 billion yen and operating profit of 130 million yen, for approximately 1.84 billion yen, including advisory fees. This case is an exemplary example of an SME owner raising their company into an excellent company and succeeding the business to a major group in the best possible way. By analyzing the validity of the valuation and the synergy of entering the "telecommunications construction and IT infrastructure field" that the acquiring side is aiming for, SME owners can cultivate a realistic sense of "how much should I entrust my company to what kind of partner."

3. Introduction of "Professional PMI" at Tomoe Corporation and Reiwa Kensetsu In M&A between construction companies, the case where "Japan PMI Consulting," a group company of Japan M&A Center Holdings Inc., supported full-scale PMI (Post Merger Integration) is attracting attention. When a local non-listed construction company joins the group of a Tokyo Stock Exchange listed company (Tomoe Corporation), the highest barrier is the "difference in governance and internal control standards." Building a system to bridge this gap with the help of experts and fuse the strengths of both companies is an initiative that will become a textbook for all future M&A.

4. Shareholder derivative suit against Nidec The shareholder derivative suit this time at Nidec, which has achieved growth through aggressive M&A, is a warning to all managers. It tells us how important thorough due diligence (asset assessment) before executing an acquisition, multifaceted discussion at the board of directors, and documentation (document preservation) of the decision-making process are. Even for SME M&A, which tends to proceed at the "president's discretion," if governance is neglected, it could lead to major legal and financial trouble in the future.

By connecting these news items as a line rather than seeing them as points, a complete cycle of M&A success comes into view: "ensuring financial safety (goodwill)," "acquiring an excellent company at an appropriate valuation (MT Genex case)," "thoroughly implementing PMI with the help of professionals after acquisition (Tomoe Corporation case)," and "always maintaining highly transparent governance (Nidec lesson)."

Article

Overview of the news

1. Decision to maintain goodwill amortization, Financial Accounting Standards Foundation to reduce corporate financial risk

The Financial Accounting Standards Foundation (FASF) has decided to maintain the current standard of "periodic amortization," in which a fixed amount is regularly processed as an expense each period for "goodwill" (the difference between the net assets of the acquired company and the acquisition price, indicating excess earning power such as brand strength and technical ability) generated in corporate M&A. Under International Financial Reporting Standards (IFRS) and others, goodwill is not amortized, and there is a rule to record an "impairment loss" in a lump sum only when it is judged that the value has significantly declined. However, if the business after the acquisition does not proceed as expected, this would result in recording a sudden large deficit on the scale of hundreds of billions of yen, which carried the risk of dealing a major blow to the company's stock price and financial health. The decision to "maintain amortization" in Japanese standards will continue to provide acquiring companies with predictable and stable means of controlling impairment risk. * Reference source: [1]](https://www.nikkei.com/article/DGXZQOTG1791D0X10C26A7000000/)

2. MT Genex makes electrical equipment company Next a 100% subsidiary for 1.84 billion yen

MT Genex Corporation (Tokyo Stock Exchange Standard: 9820) resolved at its Board of Directors meeting on July 21, 2026, to acquire all shares of Next Co., Ltd. (Headquarters: Tokyo) and make it a wholly-owned subsidiary. The execution of the share transfer is scheduled for July 31, 2026. The target company, Next, handles telecommunications construction, IT infrastructure construction, and low-voltage/high-voltage equipment construction, and is a company with an extremely sound financial base, boasting sales of 1,607 million yen, operating profit of 125 million yen, net income of 129 million yen, and net assets of 1,032 million yen for the fiscal year ended October 2025. The acquisition cost will be a total of 1,844 million yen, consisting of 1,771 million yen for common shares plus 73 million yen for advisory fees and other expenses. Through this acquisition, MT Genex aims to incorporate the technology and resources of the electrical equipment construction field and pursue business synergies across the entire group. * Source: [2]](https://note.com/manav_/n/n7dbd4f9bef34)

3. Practice of Professional PMI Support in Construction Industry M&A

According to press releases from Nihon M&A Center Holdings Inc. and others, it was announced that in the M&A between Tomoe Corporation (listed on the Tokyo Stock Exchange Standard) and Reiwa Kensetsu Co., Ltd., professional PMI (Post Merger Integration) support was provided by the group company "Nihon PMI Consulting." This M&A aimed to maximize synergies within the construction industry, and a key mission after the acquisition was to align the internal structure and management operations of the acquired company, Reiwa Kensetsu, with "listed company standards (Tomoe Corporation's standards)." By having experts intervene to conduct PMI, this case is highly regarded both inside and outside the industry as a concrete example of a process that minimizes operational disruption while building a legal compliance system, developing management accounting, and fostering harmony between the employees of both companies. * Source: [6]](https://prtimes.jp/main/html/rd/p/000000608.000081927.html) / [5]](https://mito.keizai.biz/release/615666/)

4. Shareholder Derivative Lawsuit Request Against Nidec

Nidec Corporation (Tokyo Stock Exchange Prime: 6594) made a timely disclosure on July 21, 2026, that it had received a "demand for litigation" from a shareholder requesting the filing of a lawsuit to pursue the liability of directors (shareholder derivative lawsuit). Details of the disclosure are available for download in PDF format, and it appears that the shareholder is requesting the company to file a lawsuit regarding past investment decisions and alleged breaches of the duty of care by directors in M&A activities. This situation demonstrates that even for a charismatic management company known for its aggressive acquisition strategy, the eyes of the market and shareholders regarding its governance and decision-making processes are extremely strict. * Source: [3]](https://www.nikkei.com/nkd/disclosure/tdnr/20260721596903/)

Perspectives on M&A that "Open Up the Future" for Presidents to Consider

For many SME owners, M&A is often thought of as "something only for large companies that make headlines in the business section of newspapers." However, in modern Japanese business society, it has become the "most effective management strategy tool" for solving business succession problems and elevating one's company to greater heights.

The news covered today contains essential management perspectives that SME owners must grasp in order to "open up the future." Let's delve into them from four perspectives.

Perspective 1: The Financial Peace of Mind that "Maintaining Goodwill Amortization" Gives SME Owners

When acquiring another company through M&A, it is common for the acquisition price to exceed the net assets of the acquired company. This difference becomes "goodwill." For example, if you buy a company with 300 million yen in net assets for 500 million yen, 200 million yen is recorded as "goodwill" on the acquirer's balance sheet.

Here, the difference in treatment between Japanese GAAP (J-GAAP) and International Financial Reporting Standards (IFRS) has a decisive impact on the management decisions of SMEs. - International Financial Reporting Standards (IFRS): Goodwill is not amortized each period. Therefore, as long as the acquired company's performance is good, profits will not decrease. However, if that business should significantly decline, the 200 million yen must be recorded as an "impairment loss (deficit)" all at once. The company's net assets could be wiped out in an instant, and there is even a risk of insolvency. - Japanese GAAP (J-GAAP): Goodwill is treated as an expense (goodwill amortization) in equal amounts every year, for example over 10 years (up to a maximum of 20 years), at 20 million yen per year. Annual profits decrease by 20 million yen, but the risk of a sudden, massive deficit that could lead to an "instant exit" can be thinned out little by little, as if exhausting heat in advance.

The fact that the Financial Accounting Standards Foundation (FASF) has maintained the policy of "regular amortization" provides great peace of mind to many mid-sized and small enterprises that apply Japanese GAAP, as they can continue "planned and risk-controlled M&A." The peace of mind that "even if the performance of the acquired company temporarily deteriorates, you will not be forced to take an impairment that could suddenly bankrupt the company" acts as a shield that protects the aggressive investment stance of mid-sized companies.

Perspective 2: How to Increase "Your Own Value" Learned from MT Genex's 1.8 Billion Yen Acquisition

The acquisition of the electrical equipment company "Next" by MT Genex, listed on the Tokyo Stock Exchange Standard, is an extremely strategic and beautiful valuation case by a mid-sized company.

Let's look at this transaction data. - Target company: Next (Sales: approx. 1.6 billion yen, Operating profit: 125 million yen, Net income: 129 million yen, Net assets: 1.03 billion yen) - Acquisition price (including advisory): approx. 1.84 billion yen

What should be noted here is that the acquisition price of 1.84 billion yen is traded with an "additional 810 million yen (goodwill)" over the net assets of 1.03 billion yen. Since the operating profit is 125 million yen, if you divide the 810 million yen of goodwill by the annual operating profit, it is calculated that "the goodwill portion (excess earning power) associated with the acquisition can be recovered in about 6.5 years." Even from the perspective of "EV/EBITDA ratio" or "acquisition multiples" in technical terms, this is a very appropriate and sound transaction.

What SME owners should learn is the point of "how can one become a company that can be acquired with an additional 'goodwill (premium value)' of 5 to 7 years of operating profit on top of net assets like this?" The strength of Next lies not just in simple electrical work, but in the fact that it has it possesses specialized technologies that are in extremely high demand in the modern era of DX (Digital Transformation) and smart building development, such as 'IT infrastructure construction' and 'low-voltage/high-voltage equipment construction,' as a package. If a company has its own unique strengths, a reproducible business model, and above all, a system that "stably generates over 100 million yen in core business profit every year," large companies will gladly invest as much as 1.8 billion yen and seek to incorporate that technical capability into their group.

Perspective 3: The Real Battle of M&A Begins "After the Contract." The Essence of Tomoe Corporation's "PMI"

Many managers mistakenly believe that "M&A ends (is the goal) at the moment the contract is signed and the money is settled." However, that is a big mistake. 90% of the success or failure of an M&A is determined by the post-acquisition integration process, "PMI (Post Merger Integration)."

The case where experts from the Nihon M&A Center Group supported PMI in the M&A between Tomoe Corporation and Reiwa Kensetsu, both in the construction industry, is a good example that places extreme importance on this. In M&A between construction companies, the following frictions always occur. 1. Inconsistency in business processes: Methods of creating estimates, process management, and on-site safety standards vary from company to company. 2. Differences in systems and governance: Especially when a non-listed company (Reiwa Kensetsu) comes under the umbrella of a listed company (Tomoe Corporation), tremendous management system upgrades are required, such as speeding up financial closing, compliance with laws, and building internal controls (so-called J-SOX compliance). 3. Alienation of employees' hearts: The risk that employees of the acquired side will rebel, saying "the methods of a large company were forced upon us," and talented engineers will leave the company.

To prevent these issues, we brought in third-party 'PMI experts' to promote harmony between the two companies and 'establish a system compliant with listed company standards.' Whether an SME owner is on the 'buying side' or the 'selling side,' they must not skimp on this investment in PMI. Only by integrating systems, refining evaluation structures, and unleashing the synergies of both companies (the effect of making 1+1 equal 3) can an M&A be called a 'success.'

Perspective 4: Learning from Nidec's shareholder derivative lawsuit regarding governance and the documentation of the 'decision-making process'

The news that Nidec (formerly Nippon Nidec), a global motor manufacturer, has been sued by shareholders is a governance lesson that every business owner, regardless of company size, should take to heart.

Even for SMEs, cases such as: - 'The president decided alone and bought an acquaintance's company at an arbitrary price' - 'Acquired without proper due diligence (preliminary financial, legal, and business investigation), only to find hidden liabilities (off-balance sheet liabilities) and suffer a huge loss' are everyday occurrences.

If you have co-owners, shareholders other than relatives (minority shareholders), or are conducting an M&A with a large loan from a bank, an opaque 'decision-making process' could lead to fatal situations in the future, such as shareholder derivative lawsuits or loss of credibility with lenders. When conducting an M&A, you must always: 1. Obtain an objective due diligence report from experts 2. Verify the validity of the acquisition price using multiple valuation methods 3. Conduct a multi-faceted risk review at the Board of Directors (or management meeting) and record it in detail in the minutes You must thoroughly build these as a 'defensive wall'.

Next-Generation M&A Pictorial Book - Perspectives on Designing 'Want to Sell' and 'Want to Buy'

From here on, using the strategic framework that is the core of this magazine, 'Next-Generation M&A Pictorial Book - Designing "Want to Sell" and "Want to Buy"', we will reinterpret today's news more creatively and present 'design perspectives' that business owners can connect to their actions starting tomorrow.

M&A is not just an exchange of stocks and cash. It is a 'business design' process that combines the 'history as the culmination of the seller's life' and the 'pieces of the buyer's future growth strategy' in the most beautiful way that makes both parties happiest.

``` [Next-Generation M&A Synergy Design] ```

[Seller: Next Co., Ltd.] [Buyer: MT Genex] - High technical expertise (IT/low-voltage equipment) - Customer base in real estate management and building maintenance - Excess earning power of 125 million yen in operating profit - Financial strength and social credibility as a listed company \ / \ / ★ [ Design-based combination through M&A ] ★ | [ Governance at listed company level through PMI ] (Role of Japan PMI Consulting) | [ Sustainable value creation model where 1 + 1 = 3 or more ] ```

1. Designing 'Want to Sell': Happy Retirement and Perpetuation of Corporate DNA

Let's stand from the perspective of the founder or shareholder of Next Co., Ltd. If you worked hard to build a wonderful company with 1.6 billion yen in annual sales and 125 million yen in operating profit, but had no successor, what would happen to that company? Many owners face the very sad ending of 'profitable liquidation.' Employee jobs are lost, and the technology and customer relationships cultivated over many years vanish into thin air.

However, the owner of Next made the choice to 'entrust the company to MT Genex through M&A.' Reinterpreting this from the perspective of 'designing,' it looks like this: - Maximization of financial fruits: Secured founder's profit (capital gain) of approximately 1.77 billion yen, more than enough to guarantee a lifetime, and obtained a ticket to a second life or new investments. - Guarantee of employees' future: By joining a TSE-listed group, employees' social credibility and treatment improve, and the company evolves into one that attracts even more talented personnel. - Blossoming of corporate DNA: By cross-selling Next's 'IT infrastructure and low-voltage construction technology' to the large-scale building maintenance customer network held by MT Genex, the company can deliver its technology to a massive market it could not reach on its own.

In this way, 'selling' your company is by no means a defeat or giving up. Rather, it is the 'design of an exit as the ultimate business growth strategy' that only a founder can execute.

2. Designing 'Want to Buy': Buying time and realizing non-linear growth

On the other hand, let's look at the perspective of MT Genex, the buyer. In the business of building maintenance and real estate management, it is self-evident that buildings will become smarter (IoT, energy saving, advanced IT infrastructure) in the future. However, hiring IT infrastructure construction and low-voltage equipment technicians from scratch, accumulating know-how, and building a track record as a prime contractor would require at least 10 years and several hundred million yen in upfront investment. Moreover, there is no guarantee of success.

Therefore, MT Genex made the choice to 'pay 1.84 billion yen to bring Next Co., which is already a top runner in that field and earns 125 million yen in cash every year, into its group.' This is nothing other than 'buying 10 years of time for 1.8 billion yen'.

Furthermore, thanks to the benefits of maintaining goodwill amortization, the goodwill associated with this investment (approximately 800 million yen) is systematically expensed each year, allowing this 'new growth engine' to be installed (designed) into the group safely without destroying the company's financial structure. This is the smart M&A method for designing the next generation of 'want to buy'.

3. Designing the 'Mediator': The 'Aesthetics of Combination' woven by PMI professionals

The cases of Tomoe Corporation and Reiwa Kensetsu show the change in the role of 'advisors' and 'consultants' in M&A. Conventional M&A brokerage was 'job done' once they introduced the seller and buyer, received a fee, and had them sign a contract. However, this leads to mass-producing 'unhappy M&As' where the organization falls apart after the acquisition, not only failing to generate synergy but also causing trouble surrounding the acquisition.

Next-generation M&A advisors are required to have the ability to design 'integration (PMI)' as much as, or even more than, the 'contract (deal)'. As implemented by Japan PMI Consulting, the process of instilling 'listed company-level governance' into a private company must not be an imposition of cold, rigid rules. It is necessary to harmonize the 'compliance' and 'precise financial reporting' required by the parent company, Tomoe Corporation, without killing the strengths (culture) of 'on-site craftsmanship' and 'speedy decision-making' that Reiwa Construction has cultivated.

Only by achieving this 'beautiful harmony (design) of culture and rules' can M&A create true value for both companies.

Simple Simulation of M&A Valuation (Corporate Value Assessment)

To help business owners objectively visualize their 'company's value,' I will introduce a simple 'corporate valuation framework' used in M&A practice, based on today's data from MT Genex's acquisition of Next.

Generally, the method most frequently used in M&A for small and medium-sized enterprises is the 'Annual Purchase Method (Market Value Net Assets + several years of operating profit).'

``` [Simple Corporate Value Calculation Formula using the Annual Purchase Method (Annual Multiplier Method)]

Corporate Value (Estimated Transfer Price) = Market Value Net Assets + (Actual Operating Profit × Goodwill Multiplier) *The goodwill multiplier is usually around 3 to 5 years ```

Let's apply this formula to the actual figures of Next Co., Ltd. (*For simplification, we assume book value net assets equal market value net assets).

• Next Co., Ltd. Financial Data (Fiscal Year ending October 2025)

• Net Assets (Book Value): 1,032 million yen (approx. 1.03 billion yen)

• Operating Profit: 125 million yen (approx. 125 million yen)

• Assuming a goodwill multiplier of '3 years':

• 1.03 billion yen + (125 million yen × 3) = 1.405 billion yen

• Assuming a goodwill multiplier of '5 years':

• 1.03 billion yen + (125 million yen × 5) = 1.655 billion yen

• Assuming a goodwill multiplier of '6 years':

• 1.03 billion yen + (125 million yen × 6) = 1.78 billion yen

The actual acquisition price (stock acquisition cost) was 1,771 million yen (approx. 1.77 billion yen). From this, we can see that MT Genex paid Next Co., Ltd. 'a premium (goodwill) on top of the 1.03 billion yen in net assets, equivalent to approximately 6 years (approx. 740 million yen) of future stable operating profit.'

Why was such a high valuation of '6 years' given, compared to the typical small and medium-sized enterprise M&A (goodwill multiplier of 3-5 years)? The reasons are mainly summarized in the following three points.

1. Exceptional financial health: With an operating profit of 129 million yen against sales of 1.6 billion yen (a net profit margin of over 8%), it boasts very high profitability within the construction and equipment industry, as well as a high equity ratio (net assets of 1.03 billion yen).

2. Access to growth sectors: Establishing a position in markets where expansion is guaranteed by future demand for smart offices and DX, such as IT infrastructure construction and low-voltage equipment installation.

3. Scarcity of human resources: Currently, the construction and equipment industry is facing a severe labor shortage. The value of being able to bring an entire 'group of excellent engineers' who already possess high technical skills and function as an organization into your corporate group has a meaning that goes beyond mere numbers.

In this way, while based on financial data (net assets and operating profit), valuations are further enhanced by designing the company's 'market scarcity' and 'future growth potential.' By being conscious of both 'increasing net assets (enhancing internal reserves)' and 'polishing core earning power (generating stable operating profit)' in daily management, SME owners can maximize their 'company's value' when the time comes.

Today's Summary and Questions for the President

The lessons learned from today's news are extremely clear.

1. Understanding the 'institutional shield' of maintaining goodwill amortization, and living in an era where you can plan appropriate M&A strategies from a medium- to long-term perspective without fearing sudden financial risks.

2. As the MT Genex case shows, if you thoroughly polish your core business and increase your market value, you can always make strategic choices such as a happy retirement at the best valuation or joining a major group (business succession).

3. As the Tomoe Corporation case teaches, M&A does not end with signing a contract, but only succeeds through 'PMI (post-acquisition governance and organizational integration processes)' with the help of professionals.

4. As Nidec's lawsuit claim warns, no matter how small the company, governance such as 'transparency, validity of processes, and thorough due diligence' in M&A and investment decisions is essential to protect the owner.

Based on these points, I would like to present the following 'three questions' to SME owners across the country and business leaders who are envisioning new growth.

[Questions for the President]

Question 1:

'How is the unique technology, customer network, and organizational strength that your company has cultivated over many years currently being designed (polished) as an 'exquisite piece for buying 10 years of time' for large corporations or buyers in other industries?'

Question 2:

'If an acquisition offer from a competitor or adjacent industry company that promises excellent synergy were to come your way tomorrow, do you have a concrete blueprint or a network of experts to ensure the success of 'PMI (management systems and employee culture integration) after the acquisition?'

Question 3:

'Are your company's current management decisions, especially the decision-making processes surrounding new investments and M&A, being accumulated as documents (minutes and research reports) that can prove to shareholders, banks, and even future acquiring companies that they were 'highly transparent decisions based on repeated, appropriate due diligence?'

M&A is not just about buying and selling companies. It is a 'future design' to connect the soul (DNA) of a company to the next generation and rebuild Japan's industrial competitiveness. Why not take a step toward the next growth by re-examining the true value your company possesses?'Future Design'.

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