Find out what it takes to position your business for growth and opportunity through M&A.
As an SME owner, thinking about the future of your business can be overwhelming. If you’ve ever wondered if merging or being acquired is the right choice for your company, you’re not alone.
Whether you are seeking growth or planning an exit, M&A can be a transformative strategy to accelerate expansion, access valuable resources like funding and technology, and boost competitiveness. M&A is also a powerful tool for succession planning, ensuring business continuity, safeguarding your legacy, and supporting your employees’ future.
In recent years, M&A activity has been on the rise in Malaysia. At Nihon M&A Center, we’ve seen a surge in inquiries, doubling our closed deals in 2024 compared to 2023. This reflects Malaysia’s growing appeal, mainly driven by government initiatives, growing foreign investments, and political stability.
In Q1 2024 alone, the country secured RM83.7 billion in approved investments, marking a 13% growth from the previous year. Furthermore, the Malaysian government’s commitment of RM25 billion to the semiconductor industry underscores its dedication to establishing the nation as a key player in this high-growth sector. These developments solidify Malaysia’s position as an appealing destination for regional and global investors.
In view of the rising trend, this offers a golden opportunity for SME owners to leverage M&A for growth and transition. However, M&A success requires meticulous planning and preparation to ensure the desired outcome. The process can be complicated as it involves a comprehensive analysis of financials, legal considerations, operational efficiencies, and cultural alignment. This complex process is where our expertise at Nihon M&A Center excels. We’ve helped many SMEs in Malaysia and Japan throughout the process, and our solid understanding of cross-border deals ensures that we can position your business to attract the right buyers while aligning deals with your growth and succession goals.
If you are considering M&A, preparation is key. Here are key areas SME owners should focus on to effectively position their business for success – and how Nihon M&A Center can be a strategic advisor throughout the process.
#1 Evaluate Your Business and Define Your Goals
First and foremost, figure out why you want to pursue an M&A. Is it to enter a new market, gain access to new technology, accelerate growth, or to exit the business? Knowing and understanding exactly what your goals are will guide the entire M&A process. A well-defined strategy will help you determine the best type of deal for your company. At the same time, understanding your objectives will ensure your M&A deal aligns with your long-term growth as you seek the right type of buyer or partner that fits your goals.
#2 Assess Your Business’s Value
Before you even think about negotiating or finding a buyer, you need to understand what your business is worth. One thing worth mentioning here is that the value of your business isn’t just about profits – it’s about your market position, intellectual property, customer base, and the potential for your branding and business’s legacy.
Our suggestion? Start by getting a thorough business valuation. This isn’t just a quick estimate – it’s an accurate detailed picture of your business’s financial worth. To prepare for this, your financial statements, projections, and tax records should be in order, and key business areas like operations, legal standing, and employee structures should be well documented.
At Nihon M&A Center, we can help provide an in-depth valuation tailored to your needs, benchmarking your business against market trends and as a projection that looks at the future performance of your company. This is especially useful for SMEs as it will ensure you receive a fair and competitive price based on your position within your industry.
#3 Know the Trends and Market
The M&A landscape is constantly shifting. In Malaysia, for example, we’ve seen an increase in strategic acquisitions by foreign investors, especially Japanese firms looking to expand into Southeast Asia to scale or tap into new markets. Cross-border deals are gaining traction, and understanding this can give you an edge when it comes to positioning your business effectively as well as negotiating with potential partners.
Our expertise in cross-border M&A between Japan and Malaysia gives us a unique insight into buyer preferences. With this, we’re able to help you adapt to market demands, making your business more attractive to potential buyers.
#4 Get Your Financials in Order
Start by reviewing your company’s financial documents – profit and loss statements, tax returns, balance sheets, and any outstanding debts or liabilities. Make sure they are accurate, up to date, and in compliance with relevant standards. Conducting internal or external audits can help identify any discrepancies or issues that could arise during due diligence. You’ll also want to have projections that show potential growth.
It can be a daunting task, but getting this right from the start can make the difference when it comes to receiving the right offers as clean, organised financial records are an advantage when it comes to M&A. Buyers want to see them clear and detailed. Intricate or incomplete financial records raise red flags and even turn potential buyers away.
Engaging an advisor can help you through this very important step, ensuring you’re prepared and that no surprises derail the process. Our financial advisory services help SMEs streamline their finances and ensure all records are accurate, compliant, and ready for due diligence. We address potential issues early, rationalising discrepancies to ensure clarity and avoid misunderstandings between parties, so you’re fully prepared for negotiations.
#5 Review Legal and Regulatory Compliance
Before initiating discussions, resolve any legal disputes and ensure contracts with customers, suppliers, and employees are transferable or renegotiable if necessary. Be sure to resolve any ongoing legal disputes or pending litigations, as these could raise concerns for potential buyers. Additionally, protecting your intellectual property (IP), if any, is crucial in M&A, as it serves as a key barrier to entry for competitors and enhances your company’s value by showcasing unique selling points. Ensuring compliance with regulations is equally essential to facilitate a smooth transaction.
At Nihon M&A Center, we provide assistance with legal and operational reviews for SME owners to ensure their business stands up to scrutiny and inspires buyer confidence.
#6 Plan Your Exit Strategy
Define what your ideal exit strategy looks like – both financially and operationally. This includes considering the financial terms of the deal, the future of your employees, and how the company will continue to grow. Being clear on all of these will help you achieve the best possible outcome for yourself and the company, as it will allow you to make better decisions and manage expectations for your stakeholders, including suppliers, customers, government departments, banks, and all other related parties. These stakeholders share a common concern: The continuity of their business or relationship with your company after the M&A. Keeping all parties informed and addressing potential concerns is essential to maintaining continued trust.
A well-thought-out strategy will help align expectations and guide decisions during negotiations. Discussing these plans with our M&A professional can provide clarity and support to craft an exit plan that meets your needs.
#7 Know What You’re Getting Into
Last but most important – make sure you know exactly what you want out of the M&A and what it will entail. M&A isn’t just about getting the highest price for your company – it’s about getting the right terms, payment structures, contingencies, and guarantees. Understanding the full scope helps you secure the best possible outcome.
With years of experience in M&A advisory, our team ensures every aspect of the deal aligns with your goal. We work closely with you every step of the way, from preparing your business for sale to handling the negotiation and post-sale integration, minimising risks and maximising value.
The M&A process is complex, but with the right preparation and a trusted advisory team like Nihon M&A Center, you can navigate it with confidence. With our many years of experience, a robust network, and expertise in both Japanese and Malaysian markets, we are here to help you position your business for success.
Our one-stop advisory services cover all the essentials – valuation, financial analysis, legal guidance, deal structuring, and many more. We simplify the process, enabling you to focus on what matters most – achieving your business goals.
If you’re ready to take this next step for your business, let’s talk. Contact Nihon M&A Center today, and we’ll help you navigate this very important journey with confidence and expertise.
