Next Generation Technology Group, the first listing on the Tokyo Stock Exchange this year, jumped on its trading debut.
The shares climbed as much as 58% to JPY3,165 ($27.90) in early trading in Tokyo on Wednesday. It later pared some of those gains and traded at JPY2,906 at 10.32am in Tokyo, giving it a market value of JPY25 billion.
The company seeks to solve the nagging problems of an ageing population: many of Japan’s manufacturers make first-rate products but they have nobody to inherit their firms.
The firm acquires companies in need of future leadership with competitive technologies and high margins, said Eiichi Arai, the Tokyo-based firm’s chief executive officer.
NGTG focuses on Japanese manufacturers, many of whom are profitable and have potential to expand in global markets, Arai said in an interview. In the initial public offering, about 29% of shares were sold to investors based in Europe and Asia, with the rest going to buyers in Japan.
Unlike private equity funds, whose usual goal is to sell companies they took over at a profit, NGTG holds on to firms it bought, taking a share of their earnings. It’s acquired 10 companies since 2018, when the company was established.
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Arai, who was previously involved in investment at Mizuho Securities Co. and the government-backed Innovation Network of Japan, decided to create his company after taking more than a year off to travel around the world and seeing the reputation of Japanese companies abroad.
“I felt manufacturing is what makes Japan respected in the global community,” Arai said. Japan’s push to get companies to take steps to boost shareholder value is also a positive factor, as is the increase in investor activism, he said.
Japan has about 2.45 million small-business owners, about half of whom have yet to identify a successor, according to the Small and Medium Enterprise Agency, a unit under the nation’s economic ministry. The supply of workers is limited by the number of the elderly who can’t work in one of the world’s oldest populations, and that also makes it a challenge to find successors to take over companies with aging management.
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Of about 170,000 companies in Japan, 62% lacked a successor last year, up over 1 percentage point from the previous year, according to Tokyo Shoko Research data. That figure has been rising since the survey began in 2019, it said.
Having no successor is a risk when the management is old, because the company may go bankrupt, close down suddenly, or default on debt, Tokyo Shoko Research said.
Having successors also appears to be an effective way of increasing corporate profits. Companies that got new management saw sales growth exceed the industry average from the third year after succession, according to a survey by Teikoku Databank.
