Selling a Business in Tokyo
Japan is Asia's largest economy and its M&A market is in a structural transformation driven by corporate governance reform, an ageing population, and decades of accumulated cross-shareholdings being unwound. For founders selling a Japanese business, the buyer universe now includes both world-class PE funds that have built significant Japan presence and domestic strategic acquirers operating under genuine pressure to grow through acquisition rather than organic development.
The Tokyo mid-market M&A landscape in 2026
Japan's M&A market has undergone a remarkable transformation over the past decade. The Tokyo Stock Exchange's governance reform campaign — which culminated in the sweeping 2023 reforms demanding that listed companies with price-to-book ratios below 1x present concrete improvement plans — has forced Japan's historically insular corporate landscape to confront restructuring and divestiture on a scale not seen in the post-war period.
The result is a wave of corporate carve-outs, spin-offs, and non-core divestiture that will continue for years. For Bain Capital, KKR, and Carlyle — all of which have built substantial Japan platforms — this creates an extraordinary pipeline of buyout opportunities. For cross-border strategic acquirers, it means Japanese conglomerates are genuinely motivated sellers of subsidiary businesses in a way they were not five years ago.
Japan is also a major source of buyers. Japanese companies — the large trading houses (Mitsubishi, Mitsui, Sumitomo), technology groups, and financial institutions — are among the world's most active overseas acquirers. They are an important buyer pool not just for Japanese assets but for European and US businesses too, particularly in manufacturing, technology, and professional services. Understanding who the Japanese buyers are, how they make decisions, and how to run a process that appeals to their priorities is a distinct capability.
The yen's structural weakness has created real FX complexity: yen-denominated valuations translate very differently into USD or EUR terms depending on when and how currency hedging is applied. Getting this right in deal structuring matters materially for net proceeds.
Key sectors driving Tokyo M&A
Japan's economy spans technology, automotive, consumer, financial services, healthcare, and real estate — all active in M&A. Here is what buyer appetite looks like across each sector.
Technology & Software
Japan's technology sector — home to Sony, Panasonic, Fujitsu, and a vast ecosystem of specialist suppliers, spinouts, and independent software vendors — generates substantial M&A activity. The Japanese government's push to accelerate digital transformation across the economy has increased domestic strategic appetite for technology acquisitions. For founder-owned software businesses, both global PE funds active in Japan and domestic strategic acquirers from the Nikkei-listed conglomerates represent active buyer pools. Language capability in the diligence process is essential — most Japanese technology companies maintain records primarily in Japanese.
Automotive & Precision Engineering
Japan's automotive supply chain — among the world's most sophisticated — generates consistent M&A activity as global OEM supply relationships evolve and as electrification creates winners and losers among Tier 1 and Tier 2 suppliers. Precision engineering businesses, specialist component manufacturers, and automotive technology companies attract both Japanese strategic acquirers and international buyers seeking supply chain positions. The transition to EV is creating particular urgency among combustion-era suppliers to find strategic homes.
Consumer & Retail
Japan has one of the world's most discerning consumer markets. Consumer brands, specialty retail, food and beverage, and lifestyle businesses attract consistent interest from both domestic acquirers — particularly the large trading houses (sogo shosha) with consumer investment mandates — and international buyers seeking access to Japan's sophisticated consumer base or the global licensing potential of Japanese heritage brands. Brand narrative and product provenance carry significant weight in buyer assessments.
Financial Services
Japan's financial services sector — historically insular — has been opening progressively to M&A. Asset management, insurance, and financial technology businesses attract both domestic mega-banks seeking to diversify and international financial institutions building Japan presence. FSA (Financial Services Agency) regulated entities require regulatory approval for changes of control. Japan's ageing demographics are creating structural demand for wealth management, pension products, and healthcare-adjacent financial services.
Healthcare & Life Sciences
Japan's ageing population is one of the world's most significant structural investment themes, and healthcare services, medical devices, pharmaceuticals, and elderly care businesses attract sustained buyer interest. Japan's PMDA (Pharmaceuticals and Medical Devices Agency) regulatory framework and the complexity of the Japanese healthcare reimbursement system require specialist knowledge in due diligence. Both domestic and international strategic buyers are highly active, and PE investment in healthcare services has grown materially.
Real Estate & Construction
Tokyo's real estate market — characterised by long-term capital appreciation, yield stability, and structural undersupply in prime central locations — generates substantial transaction activity. Real estate services, construction, property management, and facilities management businesses attract interest from J-REITs, domestic conglomerates, and international real estate investors with long-horizon Japan strategies. The weak yen has made Japanese real estate assets attractive to international buyers when valued in their home currencies.
Japan-specific considerations when selling your business
Selling a Japanese business involves legal, regulatory, cultural, and language considerations that are genuinely distinct from any other major market. These need to be factored into process design from the outset.
Japanese Corporate Law & Transaction Structure
Japanese Corporate Law (Kaisha-ho) governs the mechanics of M&A transactions in Japan, including share transfers, business combinations, and board approval requirements. Share sales are the most common structure, but stock-for-stock mergers, company splits (kaisha bunkatsu), and tender offers for listed entities each have specific legal requirements. Board approval requirements, shareholder approval thresholds, and dissenting shareholder appraisal rights all need to be mapped carefully at the outset of a transaction. Japanese corporate documentation is typically maintained in Japanese, and quality legal translation is an unavoidable cost in cross-border transactions.
JFTC Antitrust Filing
The Japan Fair Trade Commission (JFTC) requires pre-closing notification for transactions that exceed specified domestic sales thresholds. The filing process is typically straightforward for transactions without material horizontal overlaps, but the JFTC review can take 30 days for simple matters and longer for transactions that raise competition concerns. Where the target operates in a sector with concentrated market structure — common in Japan given the keiretsu-influenced corporate landscape — early engagement with antitrust counsel is advisable.
TSE & Corporate Governance Reform
The Tokyo Stock Exchange's corporate governance reforms — initiated in 2015 and significantly accelerated through the 2023 reform package — have created one of the most significant structural drivers of Japanese M&A in decades. Listed companies are under pressure to divest non-core assets, unwind cross-shareholdings, and improve return on equity. This has generated a wave of carve-out and divestiture opportunities that is expected to continue for years. For buyers of carved-out businesses, understanding the nature of the relationship with the former parent — including transitional service agreements, shared infrastructure, and customer referral arrangements — is critical.
Language, Culture & Process Design
Japan is the only major M&A market in the world where the language barrier is genuinely significant for the majority of transactions. All serious processes require Japanese-language information memoranda, financial models, and management presentations if the target buyer universe includes Japanese domestic acquirers — which it almost always should. Beyond language, Japanese buyers consistently prioritise operational continuity, cultural fit, and long-term relationship orientation over maximum leverage. An auction process designed for Western PE buyers will perform poorly if applied unchanged in Japan. Process design needs to reflect the specific characteristics of Japanese buyer decision-making.
What Tokyo buyers are looking for right now
Japanese buyers operate on a fundamentally different set of priorities from Western PE funds. Continuity, long-term relationships, and cultural fit are not soft considerations — they are often the primary decision criteria. Understanding this distinction, and designing a process that reflects it, is the difference between a transaction that closes and one that does not. Foreign buyers entering Japan for the first time need Japanese-language capabilities and local relationship networks. Both are essential.
Operational continuity and employee care
Japanese acquirers — strategic and, increasingly, PE — place exceptional weight on continuity for employees. Workforce reduction post-acquisition is culturally very difficult and can create significant reputational and operational problems. Sellers who can demonstrate stable employment relationships and a management team committed to the business post-close will face substantially less friction with Japanese buyers.
Long-term relationship over maximum short-term price
Japanese buyers are genuinely longer-term in their investment horizons than most Western counterparts. They are less interested in leverage optimisation and more interested in building durable businesses. A seller who demonstrates this alignment — who is not purely maximising proceeds at the expense of business quality — will find a more receptive audience among domestic Japanese strategic buyers.
Quality of Japanese-language documentation
The quality of the Japanese-language information package is a direct signal of how seriously an international seller regards Japanese buyers. A perfunctory translation of an English CIM will not perform. A properly localised Japanese information memorandum, prepared by advisers who understand the Japanese M&A market, communicates seriousness and generates better engagement from domestic acquirers.
Technology and IP as strategic assets
Japanese strategic buyers — particularly in technology, automotive, and precision engineering — are highly motivated by proprietary technology and intellectual property. Businesses with defensible IP, patents, or unique technical capabilities find particularly strong buyer demand from domestic Japanese conglomerates seeking to accelerate capabilities they cannot build organically within the timelines their governance reform obligations impose.
Also in Asia
We advise businesses across Asia
Considering selling your Tokyo or Japanese business?
We offer an initial confidential consultation at no charge and without obligation. We will give you an honest assessment of what your business is likely worth in the current market, what a sale process would look like given Japan's specific buyer landscape and cultural considerations, and whether the timing is right. If it is not the right time, we will tell you that too.