Collaborative Consulting for Lasting Success

Can you give us a brief introduction to your company and your business activities?

YAMADA Consulting Group was established in 1989, originally as an education company. We officially began our consulting business in 2000, the same year we were listed on the Osaka Stock Exchange NASDAQ Japan market. At that time, Japan was still reeling from the post-bubble economic downturn, and many of the country’s mega banks were struggling to maintain their operations. It was in this context that we launched our consulting services, focusing on the revitalization of small and medium-sized enterprises (SMEs) that were closely tied to these major financial institutions.

With a background in accounting and experience working at an accounting firm, I began my own career as a financial advisor. For the first decade of our consulting business, our primary focus was corporate revitalization. Our goal from the outset was to provide a one-stop service to address the wide range of issues faced by SME owners. Since most Japanese businesses are family-run SMEs, we supported these clients in areas such as revitalization, succession planning, and M&A.

However, with Japan’s population in decline and the domestic market shrinking, it became increasingly clear that long-term sustainability would require looking beyond Japan’s borders. In 2016, we acquired Spire, a research firm with a strong presence in Asia. This not only allowed us to expand our geographic reach but also gave us access to valuable primary information—something that remains critical, even in an age of AI.

Our consulting model is built around having directly managed offices in key markets. We currently operate in Shanghai, Singapore, Bangkok, Jakarta, Ho Chi Minh City, Hanoi, Kuaka Lumpur, Gurugram, Dubai, Korea, and the United States. Japanese companies expanding overseas often rely solely on local partners, which can lead to cultural misunderstandings and operational friction. In contrast, by establishing our own on-the-ground teams, we can act as a reliable bridge between Japanese companies and local markets, offering end-to-end support and peace of mind throughout their overseas operations.

While our roots lie in SME consulting, we have since grown to work with large, publicly listed companies—including those with market capitalizations of JPY 500 billion or more. For instance, we may first engage with a large corporation through a research request about a specific country like Indonesia, but because of our regional presence across Asia, we’re able to provide broader, cross-border support. What sets us apart is our ability to serve clients of all sizes, across a wide range of industries. SME revitalization may be one area of expertise, but support for global expansion and strategic research is increasingly focused on major corporate clients.

You mentioned that your company initially focused on business revitalization consulting for Japan’s SME sector. From a business standpoint, one clear advantage of this market is that it tends to have fewer competitors. However, one of the challenges is that fees are generally lower compared to serving large corporate clients. To address this, your firm has diversified into M&A consulting, global business consulting and sustainable growth consulting and has begun working with larger listed companies. Could you tell us more about how you manage the balance between the benefits and limitations of primarily serving SMEs as consulting about business revitalization? And do you have plans to further diversify your revenue mix moving forward?

It’s true that fees from SME clients tend to be lower, and currently, revenue from business revitalization accounts for less than 10% of our total sales. We are committed to protecting regional employment by continuously achieving results in this market, while also looking ahead to future developments. Additionally, we strategically position this as not only a source of revenue but also as an integral component of our human resource strategy.

Once a company ceases to exist, the regional supply chain is disrupted and cannot be restored. By getting involved before that happens, we believe we can contribute to the revitalization and optimization of the entire region, ultimately helping to prevent market contraction. Furthermore, our strength lies in providing comprehensive support in areas such as business succession, M&A, and industry restructuring, which arise from business revitalization.

Furthermore, business revitalization work site is one of the best training environments for consultants during their growth process. Working closely with SME owners—many of whom are experienced presidents actively seeking ways to improve their businesses—offers invaluable, hands-on insight into corporate operations and management. It’s an ideal setting for learning the fundamentals of effective business strategy and decision-making. Many members are attracted to join our company because they are drawn to our vision that "we can provide truly needed services by supporting clients in difficulty." This also plays a role in securing talent.

Our approach has always been to hire younger talent and invest in their long-term development. We prefer to bring in people without prior consulting experience and train them from the ground up. Over time, this creates a strong foundation of expertise within the company and helps us build lasting relationships with our clients.

That long-term approach to talent development is a key strength. In the broader consulting industry, it’s common for professionals to change jobs every two or three years. In contrast, 50% of our consultants have been with us for over five years, and 20% have stayed for more than a decade. This level of retention builds trust and continuity with our clients.

So while corporate revitalization may not be our most profitable line of business, it plays a vital role in developing our consultants and fulfilling our mission of contributing to society through meaningful support for Japanese SMEs.

According to data from RECRUIT Works, a leading think tank, Japan is projected to face a severe labor shortage by 2040. They estimate labor demand will reach 68.67 million, while the available workforce will only be 57.67 million—a shortfall of approximately 11 million people. Up to now, the gap hasn’t been as pronounced thanks to increased participation from women and senior citizens. However, moving forward, the growing disparity between labor demand and supply will have a serious impact on business management across Japan.

We’re currently working closely with RECRUIT Works, as well as companies nationwide, in collaboration with both regional and national banks. What’s becoming increasingly clear is that business leaders must fundamentally shift their mindset. Companies can no longer afford to remain dependent on traditional human labor models. Those that anticipate and respond to the coming labor crunch by reallocating and optimizing their workforce will be the ones that survive—and thrive. Others risk falling behind.

This situation is also accelerating structural changes across industries, particularly through increased mergers and acquisitions. With the domestic market continuing to shrink, even companies that undertake reforms often find it difficult to push their Price-to-Book Ratio (PBR) above one. As a result, we expect to see continued growth in M&A activity, along with a rise in the number of companies choosing to delist.

Japan is currently experiencing a historic M&A boom. In 2024, deal volume rose by 8% over the previous year, which had already set a record. This growth is being driven by both regulatory and structural factors. On one hand, corporate governance reforms are creating pressure—such as from the Tokyo Stock Exchange, which is targeting companies with a Price-to-Book Ratio below one, leading to the unwinding of cross-shareholdings. This is happening alongside new METI guidelines on corporate takeovers, which are requiring companies to seriously consider all offers, including hostile bids. On the other hand, structural issues—such as the growing number of SMEs without successors—are also pushing companies to turn to M&A for business continuity. Given these trends, how do you expect Japan’s M&A landscape to evolve over the next five years? And what kind of impact will this have on your business?

Industry reforms will undoubtedly continue, particularly as the gap between labor supply and demand widens. As this labor shortage intensifies, we expect M&A activity to grow even further. As a manager myself, I understand firsthand the difficulty of navigating the current labor market, where the challenge is not only attracting talent but also keeping pace with rising wages—a trend that will likely continue. The key to sustainable business growth is finding a way to consistently raise employee salaries, and that requires passing costs on to the consumer in a viable way. If a company can’t do that, its long-term survival is at risk.

We’ve observed that M&A has become a much more familiar and accessible option for SME owners. Increasingly, companies are seeking ways to reform and future-proof their businesses. That includes delisting, divesting non-core operations, or leveraging M&A to strengthen core competencies. These are the kinds of requests we’re seeing more frequently.

Ultimately, Japan’s economic survival hinges on how much we can improve productivity. Unlike the U.S., where the population continues to grow, Japan faces demographic decline. In this environment, M&A becomes not just a growth strategy—but a necessity. We see M&A as a natural extension of our consulting work.

What sets us apart is that we don’t treat M&A as a standalone service. Instead, we provide comprehensive, end-to-end support. Whether a company is looking at overseas expansion, revitalization, or growth strategy enhancement, M&A is simply one of the tools we offer as part of a broader solution. That differentiates us from boutique M&A firms. And importantly, we view M&A not as the conclusion—but as the starting point of long-term transformation.

In the M&A advisory market, speed and efficiency are often viewed as top priorities. This contrasts with your firm’s approach. As you’ve mentioned, YAMADA Consulting Group began as a consulting business, and you've cultivated long-term client relationships—evidenced by the fact that around 60% of your clients are repeat customers. This is quite different from traditional M&A advisory firms that prioritize rapid, transaction-focused execution. How do you position your services in this space, and how do you communicate the advantages of your more relationship-driven, consultative approach to clients who may be accustomed to the faster, deal-centric style of traditional M&A advisors?

Our roots lie in corporate revitalization, so our approach has always been to support company managers with the full spectrum of issues they face in sustaining and growing their business. If selling the company eventually becomes one of their options, we’re often the first firm they turn to—because we've already been walking that journey with them.

In Japan, inheritance tax can be quite significant, especially for businesses that are performing well and have a high valuation. While many accounting firms also support SMEs, their focus tends to be limited to tax and financial structuring. In contrast, we take a more holistic, long-term view of the company’s health and growth potential.

We work with a diverse range of clients and pride ourselves on building strong, enduring relationships. For example, we may begin supporting a client during a succession planning process—where the current president might initially consider passing the company to a child. But if that plan changes over time, and they instead decide to sell, we’re already familiar with the business and well-positioned to support them through the transition. This is quite different from the “transaction-only” approach that many traditional M&A firms take.

I encourage our consultants, especially those involved in revitalization work, to focus on cultivating long-term relationships. When that trust is built over years, we become the natural partner to turn to—not just for M&A, but for any strategic decision. That’s the value of our model. We aren’t here just to close a deal; we’re here to provide solutions that are genuinely in the client’s best interest, based on a deep understanding of their business and goals.

Unfortunately, in the M&A advisory market today, it’s common to see consultants stay for just two or three years, gain experience, and then branch out on their own. This has led to a proliferation of M&A firms, and with it, a rising number of client complaints. It has even attracted the attention of the Small and Medium Enterprise Agency.

One of the contributing factors is a peculiarity of the Japanese M&A landscape: it’s still permissible for one firm to represent both the buyer and the seller. In theory, this could work—if the advisor truly acts in the best interests of both sides. But in practice, achieving that balance is even harder than in financial services, where regulations are already much stricter.

We anticipate tighter regulations on the M&A sector in the future—possibly along the lines of the real estate industry, where formal valuation reports from licensed appraisers are required. There’s currently no such requirement in M&A, but I believe something like it is likely to emerge.

In recent years, Japan’s corporate landscape has come under scrutiny for several key issues. While consolidation—particularly in the SME sector—is now being addressed through increased M&A activity, two other persistent challenges remain. One is digital transformation (DX), where Japan ranks among the least digitally advanced nations in the OECD. The other is the broader lack of internationalization. Focusing on DX, we noticed in one of your recent IR documents that you aim to have DX consulting account for approximately 20% of your total revenue by fiscal year 2026. Given that DX requires a different set of skills and expertise compared to traditional consulting, what specific investments are you making to expand your capabilities in this area and ensure you can effectively support your clients’ digital transformation?

We’ve established a dedicated IT consulting division specifically focused on delivering DX services. This team works closely with our corporate management consultants to develop the most effective digital transformation models tailored to each client’s needs. For example, when companies look to upgrade their systems, many rely entirely on external vendors. In those cases, there’s a risk that unnecessary features or add-ons may be introduced. Our role is to step in with an objective, strategic plan that clearly defines what is necessary—and what isn’t—as part of a holistic DX approach.

Another important area of focus is improving business efficiency through generative AI. We’re currently piloting this internally, using deep learning to analyze and leverage the vast amount of data we’ve accumulated over time. Through this hands-on experience, we aim to develop new services that we can offer to clients in the near future.

Our DX efforts are largely being driven by a younger generation of corporate management consultants, and we’re making solid progress in line with our midterm plan. We’re confident that this approach—combining technical expertise with strategic oversight—positions us well to support our clients through meaningful, value-driven digital transformation.

Your international expansion has accelerated significantly in recent years. In 2024, you made two notable acquisitions: Pinnacle, a firm with a strong track record in cross-border M&A, and Takenaka Partners, which has an established presence in the U.S. market. In addition, you also acquired a 10% stake in Clairfield, a global M&A advisory firm with a solid track record in the mid-market segment. Could you walk us through the strategic rationale behind these three investments? And what kinds of synergies do you expect to create through these partnerships?

Takenaka Partners was founded by Yukuo Takenaka, a highly respected figure who sadly passed away in 2023. The firm has long been a leader in supporting Japanese companies entering the U.S. and other overseas markets. Our relationship with Takenaka Partners dates back to 2016, when we began a business partnership and even dispatched a staff member to their team. After Mr. Takenaka’s passing, a mutual acquaintance—Paul Yonamine, with whom both Mr. Takenaka and I had a strong relationship—helped mediate the discussions that led to the acquisition.

Through this acquisition, we’re able to leverage the Takenaka brand and its rich history, including its extensive network. For a newcomer like us in the U.S. market, relationships and trust are critical, and this move has allowed us to quickly accelerate our presence and credibility in the region. This year has been dedicated to integration and preparation, and we expect to begin seeing tangible results starting next year.

Regarding Pinnacle, the firm is led by Mr. Ikuo Yasuda, a veteran with over 40 years of experience in cross-border M&A. He has built an impressive track record and reputation in the field. Now in his 70s, he was considering a succession plan, and after several discussions, he agreed to join YAMADA Consulting Group. This acquisition enables us to inherit his knowledge, client base, and professional network, ensuring continuity while strengthening our capabilities in international M&A.

As for Clairfield, the 10% stake came at their request. By joining their global partnership network, we have secured the exclusive right to operate as Clairfield’s official partner across several Asian markets.. This gives us broader geographic reach and immediate access to high-quality cross-border deal flow—especially in the mid-market segment.

Together, these three investments form a strategic foundation for our international M&A platform, helping us expand our global reach, deepen our network, and serve clients more comprehensively across borders.

Future Predictions 2040 in Japan

These recent investments and acquisitions have helped establish a truly global network for your company. Spire, which you acquired in 2016, laid the foundation for your expansion across Asia, and now with Pinnacle and Takenaka Partners, you’ve significantly strengthened your presence in the North American market. Looking ahead over the next five years, which of your existing regions do you see as having the highest growth potential? And specifically, what are your expectations for the North American market as part of your global strategy?

In the U.S. market, our goal is to build a comprehensive, end-to-end support platform. Takenaka Partners will serve as the primary point of contact for M&A, but we’re also working to establish a broader consulting structure.

One of our key strategies is to dispatch staff from Japan to the U.S. to gain firsthand experience and build strong relationships with local teams. This kind of exposure is invaluable—not just for the individuals, but for the future of our business. Across many Japanese industries, it's common to see employees who’ve worked overseas return home and take on senior management roles. We want to nurture that same dynamic within our own organization.

In our field, human connection and trust are everything. Building a solid local presence and strong interpersonal networks is essential if we want to succeed long-term in the North American market. These relationships will be the foundation for our continued growth and expansion in the region.

One interesting trend in the U.S.–Japan M&A space is the growing number of cross-border deals initiated by American companies acquiring Japanese firms. This is particularly evident in sectors like private equity, investment banking, and asset management, where major players like BlackRock, Goldman Sachs, and Bain Capital have been actively investing in Japan. Now that you’ve established a strong network across the U.S., how are you positioning your firm to help foreign companies tap into these opportunities within the Japanese market? Is supporting inbound investment a key part of your global strategy?

We already have strong relationships with private equity funds, so supporting inbound investment into Japan is very much aligned with our strategy—and it's an area we're actively expanding into. In fact, two years ago, we introduced MASH Holdings to Bain Capital, a connection made possible because we’ve had a close relationship with the president of MASH Holdings for over a decade.

Thanks to these trusted relationships, we're able to offer comprehensive support throughout the entire investment process—from initial entry and deal sourcing to post-acquisition value enhancement. That full-cycle capability is a major strength of ours.

Another key area is succession support. We work closely with a large number of unlisted companies, many of which are actively considering succession strategies. As a result, we often receive requests from private equity funds looking for introductions to high-performing businesses that may not be on the open market yet. Because of our deep network and long-standing client relationships, we’re in a strong position to help facilitate those opportunities.

You’ve outlined a compelling case for your company’s strengths—particularly in the context of Japan’s current period of transformation, where there is rising demand for digital transformation, globalization, and M&A-driven consolidation. Financially, your most recent fiscal results were very strong. You posted a historic increase in revenue, and for the second half of the fiscal year, you maintained revenue at around JPY 17 billion while delivering a significant increase in operating income—up more than 20% to approximately JPY 3 billion. Despite this, your stock price has declined steadily—from around JPY 2,400 per share in September 2024 to about JPY 1,700 more recently. How do you explain this disconnect between your solid business performance and the current market valuation?

When we significantly outperform our internal targets, we choose to reinvest that excess into our people. While this may result in strong sales performance, the corresponding increase in net income might not be as pronounced. That’s because we distribute the surplus as bonuses to employees based on their individual contributions. It’s a core part of our compensation philosophy: rather than a success fee model, our consultants receive a stable base salary, and we share the upside collectively.

Of course, we understand the market places value on profitability and valuation, but placing too much emphasis on short-term stock performance could undermine the trust and relationship we’ve built with our employees. Striking the right balance between shareholder expectations and internal culture is essential.

Additionally, our overseas operations are still in the investment and development phase, and as such, they are not yet generating profits. That’s another reason the market may not be fully valuing our long-term potential. Our core strategy is focused on gradual, sustainable growth—not rapid spikes in performance. Naturally, this long-term view can sometimes be at odds with the market’s focus on quarterly results, which presents a communication challenge.

That said, we believe strongly in this approach. A long-term perspective is central to my management philosophy. We’re focused on creating a workplace where employees feel secure, supported, and motivated to stay for the long term. We’ve implemented reforms to improve our working environment, especially for working mothers—such as flexible schedules and remote work options—to make sure our people can perform at their best while maintaining a healthy work-life balance.

Our goal is to offer not only stability but also meaningful opportunities for growth and achievement. While this approach may not deliver the highest short-term profitability, we believe that cultivating long-term employee retention and engagement is our most valuable asset—and ultimately the key driver of sustainable growth for the company.

In 2029, YAMADA Consulting will celebrate its 40th anniversary. Please imagine that we will come back to interview you again on that anniversary. What would you like to have achieved and what would you like the company to look like by then?

We’ll be in a new building by then, the new Torch Tower that is under construction now. Torch Tower is a symbol of the large-scale redevelopment underway around Tokyo Station and will become the tallest building in Japan upon completion. Naturally, compared to our current office, there is a possibility that the rent will increase due to an increase in leased space. However, to put it the other way around, this is also proof that we are in a position to provide our clients with the trust and added value that justify such costs.

Mitsubishi Jisho Design Inc.

Mitsubishi Jisho Design Inc.

Mitsubishi Jisho Design Inc.

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Furthermore, the prestige of that location will also help us attract new employees. In the past, relocating has actually led to the growth of our business. Before, we were in Shinjuku and since, we’ve moved from there to here and have grown so much. We are confident that this relocation will lead to further business expansion and growth.

For more information, please visit their website at: https://www.yamada-cg.co.jp/en/corporate/overview/