Choosing a Cross-Border M&A Advisor in Japan: Deal Size and Fee Economics

(Amounts are shown in yen, with USD equivalents at USD/JPY = 150 for reference, rounded.)

The first point to check in choosing a cross-border M&A advisor in Japan is whether the advisor fits the expected deal size. M&A advisors in Japan fall into tiers by deal size, and the boundaries between the tiers follow each firm’s fee economics: its minimum fee and its fee rate. The SME M&A Guidelines (3rd edition), which Japan’s Small and Medium Enterprise Agency revised in August 2024 for M&A involving small and medium-sized enterprises, also list the fee rate, the base amount for fees, the minimum fee and the timing of fee payments among the factors to consider in selecting an intermediary or a financial advisor.

This article is written for corporate development and international business development teams at foreign companies and private equity firms considering acquisitions in Japan. It sets out the advisor tiers by deal size and the fee structures behind them, the shortage of advisors for cross-border transactions of ¥1–5bn (about USD 7–33 million), the steps of a cross-border transaction, and the criteria for selecting an advisor.

1. Advisor Tiers by Deal Size

M&A advisors in Japan are either financial advisors (FAs), which advise one party to a transaction, or intermediaries, which sign contracts with both the seller and the buyer and broker the transaction between them. FAs are further divided by their organization and the deal sizes they mainly handle. The boundaries overlap, and the deal sizes in the table show the main range of each tier; the ranges between the tiers, such as several hundred million to ¥1bn, are covered by the adjacent tiers.

Main deal size	Main advisor type	Contract and fees
Several tens of billions of yen and above	Investment banking divisions of major securities firms and megabanks	One side only (the client)
¥5bn to several tens of billions of yen	Corporate finance teams of Big 4 advisory firms and global independent investment banks	One side only (the client)
¥1–10bn	Independent M&A advisory boutiques	One side only (the client)
Tens of millions to several hundred million yen	M&A intermediaries	Both seller and buyer

Major securities firms and megabanks

These firms mainly handle large transactions, such as large acquisitions and tender offers by listed companies and restructurings of large corporate groups.

Big 4 corporate finance teams and global independent investment banks

The corporate finance teams of Big 4 advisory firms, which advise on M&A and are separate from the teams that conduct financial and tax due diligence, and global independent investment banks mainly handle transactions of ¥5bn to several tens of billions of yen, including cross-border transactions through their domestic and international networks.

Independent M&A advisory boutiques

These are FAs that focus on specific deal sizes, sectors or regions. Firms that mainly handle transactions of ¥1–10bn belong to this tier.

M&A intermediaries

Intermediaries sign contracts with both the seller and the buyer and collect fees from both. The SME M&A Guidelines (3rd edition) set out specific conflict-of-interest practices prohibited for intermediaries. Intermediaries mainly handle domestic succession transactions of tens of millions to several hundred million yen.

2. Fee Structures and the Break-Even Deal Size

Calculation of success fees

M&A advisory fees combine a fee on signing, a monthly retainer, interim fees and a success fee on completion. The success fee, the main component, is calculated by applying a fee rate to a base amount such as the transaction value, and the Lehman formula, under which the rate declines step by step as the base amount increases, is widely used. The base amount (transaction value, net assets, total assets transferred and others) differs by firm, so the same rate can produce different fees.

Disclosure of fees

Japan’s Small and Medium Enterprise Agency requires firms registered under its M&A support institution registration system to disclose the basis of their fee calculation as a condition of continued registration, and the disclosed fee structures are published in its database of registered M&A support institutions. The database can be searched by type of support (intermediary or FA), by side (seller or buyer), by minimum fee level and by method of calculating success fees, such as the Lehman formula applied to share value.

Minimum fees and the break-even deal size

Many firms set a minimum success fee. At larger firms (the investment banking divisions of major securities firms and megabanks, the corporate finance teams of Big 4 advisory firms and global independent investment banks), the minimum fee is typically around ¥100 million (about USD 0.67 million). Under the Lehman formula the rate varies with the base amount, but in a simplified calculation at a flat rate of 2%, the success fee reaches ¥100 million at a deal size of ¥5bn (about USD 33 million) (our calculation).

Below that deal size, the minimum fee is high relative to the deal for the client. For a ¥2bn transaction, a minimum fee of ¥100 million equals 5% of the deal size (our calculation). For the firm, a fee below the minimum does not cover the staff and time required, so transactions in which the client does not accept the minimum fee tend to fall outside the firm’s mandates.

The table shows the fee and its ratio to the deal size in a simplified calculation at a minimum fee of ¥100 million and a flat fee rate of 2% (our calculation).

Deal size	Fee	Fee as a share of deal size
¥1bn	¥100 million (minimum fee)	10.0%
¥2bn	¥100 million (minimum fee)	5.0%
¥3bn	¥100 million (minimum fee)	3.3%
¥5bn	¥100 million	2.0%
¥10bn	¥200 million	2.0%

Fee sharing in global networks

At firms in global networks, such as the Big 4 advisory firms, the fee on a cross-border transaction is shared among the member firms in each country involved. In cross-border transactions, each member firm receives a smaller share of the fee, and the smaller the transaction, the harder it is for the firm to make it economic.

3. The ¥1–5 Billion Range

In the ¥1–5bn range, the lower band of the mid-market, the economics rarely work not only for major securities firms and megabanks but also for Big 4 corporate finance teams and global independent investment banks. M&A intermediaries mainly handle smaller domestic transactions and, because they collect fees from both the seller and the buyer, do not act to maximize the interests of one party.

Cross-border transactions add work that domestic transactions do not require: searching for candidates in the counterparty’s country and approaching decision-makers directly, negotiating in the counterparty’s language, coordinating with local legal, tax and accounting advisors, and handling differences in decision-making procedures and timelines across countries and companies. Even among the independent boutiques that mainly serve this range, few cover all of this work in cross-border transactions. As a result, in cross-border transactions of ¥1–5bn, few advisors act for one side only and cover the full process from the counterparty search to negotiation and execution. The shortage affects each party as follows.

Foreign companies acquiring Japanese companies

In our experience, discussions with owners, non-binding offers and negotiations of definitive agreements for Japanese private companies are mostly conducted in Japanese. A foreign buyer needs an advisor that searches for and approaches counterparties in Japanese and handles the negotiations through to signing.

Japanese companies acquiring companies overseas

Targeting overseas companies that are not in a sale process requires research on candidates in the counterparty’s country and direct approaches to owners and parent companies. For transactions below ¥5bn, securing an advisor on the Japanese side that handles the process from the counterparty search to the definitive agreement is a precondition for the transaction.

Owners and parent companies selling

When a seller extends the buyer universe beyond Japan to overseas companies and investors, the seller needs an advisor that approaches overseas buyers in parallel with domestic buyers. For sales of ¥1–5bn, few advisors act to maximize the seller’s interests and also cover overseas buyers.

4. Steps of a Cross-Border Transaction

Each step of a cross-border transaction involves issues that domestic transactions do not. The table shows the main steps, the work of the advisor and the issues specific to cross-border transactions.

Step	Main work of the advisor	Issues specific to cross-border transactions
Strategy and criteria	Defining the investment policy and acquisition criteria; checking consistency with the investment budget and capital policy	Initial review of foreign investment regulations and licenses (with local advisors)
Counterparty search	Designing the candidate universe; building the list; approaching decision-makers directly	Approaches in the counterparty’s language; collection of local company information
Initial discussions	Non-disclosure agreements; analysis of disclosed information; management meetings	Differences in the language and accounting standards of disclosed materials
Non-binding offer	Preliminary valuation; presentation of key terms	Pricing and deal structure reflecting currency and tax
Due diligence and definitive agreement	Management of due diligence (with specialist advisors); negotiation of the definitive agreement	Governing law and dispute resolution; scope of representations and warranties
Closing	Management of conditions precedent; preparation for closing	Regulatory approvals; cross-border settlement

On both the buy side and the sell side, we run the counterparty search on a standard 3-month timeline.

5. Criteria for Selecting an Advisor

Fit between deal size and fees

Confirm the minimum fee, the fee rate, the base amount and any signing fee or monthly retainer, and estimate the total fee and its ratio to the expected deal size. At deal sizes where the minimum fee exceeds the fee calculated at the rate, the ratio rises sharply.

Registration and explanation

Japan’s Small and Medium Enterprise Agency advises companies to check, before selecting an M&A support institution, whether it is registered under the M&A support institution registration system and whether it has given a specific explanation of its fees and services. The SME M&A Guidelines (3rd edition) require intermediaries and FAs to explain the details of their fees, the services provided at each step, and the qualifications, years of experience and track record of the staff in charge.

Position

Confirm whether the advisor is an FA acting for one side only or an intermediary contracting with both sides. The SME M&A Guidelines (3rd edition) set out specific conflict-of-interest practices prohibited for intermediaries, and the client should also confirm the contracting parties and the source of the advisor’s fees.

Method and timeline of the counterparty search

Confirm the method for building the candidate universe and the timeline to approach. The points to confirm include coverage of companies that are not in a sale process, direct approaches to decision-makers at the candidates, and the number of months to narrow down the counterparties for further discussion.

Language and local coordination

Confirm the ability to negotiate in the counterparty’s language and to coordinate with legal, tax and accounting advisors in the counterparty’s country.

6. Syntax Partners

Syntax Partners is a Japan-based independent M&A advisory firm specializing in cross-border transactions, established in response to the shortage of advisors that act for one party in cross-border transactions of ¥1–5bn. We act solely as financial advisor and advise only one side in any transaction, either the buyer or the seller, mainly on transactions of ¥1–10bn. Syntax Partners is a registered M&A support institution under the M&A support institution registration system of Japan’s Small and Medium Enterprise Agency.

Buy-side advisory

For companies and private equity firms considering acquisitions or partnerships in Japan and overseas, we cover the full process: research and listing of targets based on the client’s strategy, direct approaches to owners and parent companies, negotiation and execution. We run the counterparty search on a standard 3-month timeline: we design the candidate universe and build the list in month 1, and approach decision-makers directly in months 2 and 3. We also search for add-on acquisitions by private equity firms and carve-outs from large groups.

Sell-side advisory

As an advisor that maximizes the interests of sellers and owners, we support owners and parent companies considering a sale or business succession. We also advise on the sale of companies owned by private equity, and we include overseas strategic buyers alongside domestic companies in the buyer universe. The counterparty search follows the same standard 3-month timeline as on the buy side.

Fees and team

Our fees generally combine a monthly retainer with a success fee, documented in an engagement letter for each transaction. With a partner-led, lean team and efficient operations, we propose fees suited to this deal size range. We work in Japanese, English, Chinese, Korean, Thai and other major Asian languages, and with a network of more than 50 partner firms in more than 15 countries and regions, depending on the transaction.

Selected engagements are listed in our Track Record.

We welcome discussions at any stage, from early-stage exploration of acquisitions in Japan to live transactions.

Confidential Inquiry

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This article was prepared by Syntax Partners, Inc. based on materials published by Japan’s Small and Medium Enterprise Agency and our transaction experience.