SEISEI INSIGHTS — M&A
Not "Is It Expensive?" but "Is It Worth It?": How a Japanese Acquisition Is Priced
2026-07-15
From those weighing the acquisition of a Japanese company, we hear one question again and again: "Is this expensive?" But the real starting point is a different question. Not "expensive or cheap," but "does this price match what is inside it?" The first merely doubts the seller's number; the second means holding your own structure for pricing. This article sets out that approach as general information.
A Widely Used Method: Net Asset Value Plus Goodwill
In small- and mid-sized company transactions, a common way to build a price is "net asset value at fair value, plus goodwill." Japan's Small and Medium Enterprise Agency publishes an SME M&A Guideline premised on this kind of practice. The build-up has two parts.
- Net asset value at fair value — the balance-sheet assets re-measured at market value, less liabilities. In effect, the value of "what is there now."
- Goodwill — the company's future earning power. In practice this is often estimated by taking average pre-tax profit over the past several years and applying a multiple.
| Component | How to read it | Rough approach (illustrative) |
|---|---|---|
| Net asset value | Real value of existing assets | Re-measure assets at fair value, deduct liabilities |
| Goodwill | Future earning power | Average pre-tax profit × several years (the multiple varies widely by deal) |
| Total | The sum of the above | Net assets plus goodwill |
The multiple and the number of years differ greatly from deal to deal; there is no single correct figure. What matters here is not the precise number but reaching the state where you can test the seller's figure against your own structure.
A Second Set of Books: See It as Investment, Not Expense
As important as the price is the second set of books. Do you see the purchase price as a one-time expense, or as an investment with a payback period? For a business that produces steady profit, the purchase price is recovered year by year out of earnings. From this vantage, "is the price high?" becomes "in how many years is it recovered, and what remains after that?"
By contrast, funds put into a form-only incorporation with no substance generate no profit. One flows toward an asset with a prospect of recovery; the other toward an outlay with none. Grasping that difference as a structure, before any approach is made, is the point.
Treat It as a Structural Question
What we help with is showing, before any money moves, whether the deal "is worth it" as a structure. Three things to confirm:
- Can the asking price be broken into net asset value and goodwill, each holding up to explanation?
- Is the earning power underlying goodwill backed by an actual past record?
- Is the purchase price seen as an investment recoverable over a defined number of years?
Rather than leaving "expensive or cheap" to the other side, hold the structure of pricing in your own hands. That is the starting point when considering the acquisition of a Japanese company.
This article provides general information and does not constitute individual tax or M&A advice. Specific valuations and tax computations are handled by licensed partner professionals whom we introduce.