Who Will Inherit Japan?
Aging owners fuel a new era of business succession
Diners at a sleek teppanyaki restaurant in Tokyo's Asakusa district wait happily as chefs sear marbled Kobe beef over open grills. Expectations are high at Kisshokichi, one of the world's largest Kobe beef chains. But behind the brand's success lies a dilemma shared by businesses across Japan.
Founder Kiyomi Akagi, now in his mid-60s, faced a question confronting a growing number of aging owners: who would take over?
Kisshokichi's Kiyomi Akagi
Kisshokichi's Kiyomi Akagi
With no successor prepared to manage the company's 50 restaurants, Akagi chose an increasingly common solution in Japan's succession crisis -- selling the business through mergers and acquisitions to secure its future.
Search funds, private equity firms and M&A brokers are stepping in, reshaping what succession means and looks like in a country where businesses have traditionally passed down through families.
Business-owning families would protect the future of their companies through measures including adopting a male heir with leadership skills. Demographic decline and different attitudes to work, however, have changed the landscape.
Raised in a fishing family in Yamaguchi Prefecture, Akagi's path to the Kobe beef business was anything but direct. Before building the chain, he worked a variety of jobs and ran a seafood izakaya.
When it came time to plan for the future, he decided the greater risk was doing nothing.
So in July 2025 he sold a majority stake in Kisshokichi to American private equity group L Catterton, which is backed by global luxury conglomerate LVMH of France.
"First of all, take action. If you never act, you'll never see either the ending or beginning," Akagi told Spotlight Japan.
Akagi's decision reflects a broader shift as the owners of small- and midsize enterprises turn to business transfers when no successor can be found.
The traditional expectation that children will inherit the family business is weakening. A 2025 survey found that nearly two-thirds of business owners' children had no intention of taking over, often because they wanted to pursue different careers.
Strike Group, a major M&A brokerage firm, estimates between 13,000 and 14,000 domestic M&A deals took place in 2025. President and CEO Kazuya Kaneda said the SME buyouts have expanded roughly tenfold over the past two decades as aging owners move toward business exits.
Strike Group’s Kazuya Kaneda
Strike Group’s Kazuya Kaneda
"More than 95 percent of Japanese companies are SMEs," Kaneda said in an interview. "If business succession cannot proceed smoothly, Japan's economic growth could stagnate or even decline," he said, adding that owners are beginning to consider family succession, employee succession and M&As much more equally.
"Many owners still ideally want to keep companies within the family. But demographic change, declining birthrates and uncertainty about the future are making that progressively harder," Kaneda said.
Domestic M&A activity in Japan has risen steadily over the past decade, reaching a record 1,344 disclosed deals in 2025, according to Strike. The true total is likely far higher, as many SME succession deals are never publicly disclosed.
M&A has also become attractive because it can preserve employment, maintain business relationships and allow owners to monetize shares while removing their personal loan guarantees.
Strike's recent transactions include Kisshokichi, a Mie Prefecture seafood processor's acquisition of an aquaculture company in Ehime Prefecture, and a tie-up between a Kyoto laser technology manufacturer and an optics firm. They show how succession-related M&A is extending well beyond traditional sectors into a wide range of industries.
Kaneda said owners view employees almost like family members and place high priority on preserving jobs. At the same time, buyers are not generally pursuing buyouts to downsize. Because Japan's labor force is shrinking, acquiring companies also see M&A as a means of securing workers and preserving talent.
※Graph Source: M&A Online/Strike Group
As of 2025, research agency Teikoku Databank estimated that the rate of companies nationwide without a successor stood at 50.1 percent, a decrease of 2.0 percentage points from the previous year, marking the seventh consecutive year of improvement.
The government's latest data notes that successor shortages have eased in recent years but warns that business owners remain heavily concentrated in older demographics, with those over 60 accounting for more than half of SME managers.
Rather than a sign of failure, Akagi and other founders are starting to see selling outside the family as a practical way to preserve a business.
※Graph Source: Teikoku Databank
That shift is also opening the door to a new generation of entrepreneurs.
Yutaro Miwa, 37, acquired Kanagawa Prefecture-based salon Hair Make One through a search fund after careers in trading, consulting and apparel. He had no prior management experience.
Hair Make One President and CEO Yutaro Miwa.
Hair Make One President and CEO Yutaro Miwa.
The company's founder had built the business over roughly a decade but began exploring M&A as he looked toward a new chapter in life.
"I felt a very strong personal fit with the culture of the company, and ultimately that became the deciding factor," Miwa said, explaining that he has always had an interest in labor-intensive businesses built around people.
Kimitake Ito, president and CEO of Search Fund Japan, which arranged the acquisition, said emotional barriers for founders are often harder to surmount than business ones. Businesses that are overly dependent on a founder are also difficult to transfer, he said.
"Even after understanding logically they should sell, emotional conflict remains," Ito said. "Founders know they must transfer the company, but it feels like giving away a child."
Search funds typically identify profitable companies whose owners are nearing retirement, then back entrepreneurs to acquire and operate them as long-term owner-managers. Founders often remain involved during a transition period to preserve relationships with employees, customers and local communities.
For Miwa, winning over employees as an outsider has been his biggest challenge.
But since taking over in 2024, he has added four hair salons while preserving the company's culture. "Employees can actually feel the company is growing," he said.
Yasuo Goto, a Seijo University professor who studies small-business policy and Japan's economy, said the obstacle is no longer simply finding heirs but persuading younger generations that taking over a business is worth the toil. Without successors, "the disappearance of regional SMEs could weaken employment, supply chains and the country's industrial base," he wrote in an email.
Not everyone sees M&A as a perfect solution. Lawyer Katsuhiro Tsuchiya, who specializes in M&A disputes and business succession conflicts, said problems can arise when former owners remain tied to personal loan guarantees, or when brokers collecting fees from both sides face conflicts of interest.
INDUSTRY BREAKDOWN OF M&A DEALS 2025
Service, manufacturing and commerce accounted for over two-thirds of disclosed M&A deals.
※Graph Source: Strike Group
Like Miwa, Akagi said the people and culture behind the business matter most. Since founding Kisshokichi in Kobe, western Japan, he has built close ties with the farmers and communities supporting the region's famed wagyu industry.
"I think the reason I've been able to reach this point is I've always tried to act honestly," said Akagi, who retains a minority stake in Kisshokichi and remains chairman. "I hope our experience can become an example for others. It shows that even a restaurant business has options and possibilities."
Kisshokichi currently has nine restaurants in Asakusa, one of Japan's main inbound tourism hubs, including six Kobe Beef Daia teppanyaki steakhouses. They're often packed with travelers at lunchtime.
The partnership has allowed Akagi to focus on growth. Kisshokichi is consolidating its 24 brands into a handful and eyeing overseas expansion as early as 2029.
Akagi said his decision was less about selling than ensuring the future of the people and the culture behind it.
He sees himself not as the founder who stepped aside because he is tired, but because he wants to keep contributing while the company can grow.
"Of course, the ideal would have been for the company to pass from parent to child to grandchild. But I wasn't sure that was the right path," Akagi said. "I've changed jobs 12 times in my life. I've moved 16 times after getting married. I was evicted twice because I couldn't pay the rent. Those experiences shaped me as a person and as a manager."
Asked what he felt on the day he decided to proceed with the deal, Akagi paused.
"Only gratitude," he said.
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