Archived IR presentation for the Second Quarter of the Fiscal Year Ending September 30, 2025

The impression is that the difficulty level has not changed significantly. The slight increase in difficulty may be due to improved customer literacy due to the Small and Medium-sized M&A Guidelines. However, since our company has always dealt with larger projects involving clients with high literacy, we believe that the guidelines have not had a significant impact on the difficulty of our projects. Regarding industry restructuring deals, we launched the IB Coverage Department this fiscal year and have made various proposals to funds and major corporations, including large-scale deals and carve-outs. This initiative has gained momentum, and our brand has become more recognized, so we believe this is an opportune time for us.

RECOF has a narrow and deep focus on target industries and clients, so we collaborate on a per-industry and per-deal basis (such as the Vietnam deals). On the other hand, the IB Coverage Department is now attempting to work on the types of deals that RECOF used to specialize in. As future collaboration is possible, we look forward to the next developments.

We don't have an accurate figure for the number of ultra-large deals, as we don't compile this data internally. However, due to the rush to avoid the increased minimum tax, the ultra-large deals in Q1 were bigger, including some in the tens of billions of yen range, albeit the number of deals was higher in Q2. Additionally, we believe there is always a certain degree of closing delays between periods. If there were no closing delays, contract liabilities would decrease. However, since we've been able to increase contract liabilities compared to last year's powerful second half, we consider these closing delays to be within the normal range.

We continue to focus on KPI management, with all employees working on the number of client meetings, initial visits, and mandates obtained. The number of active deals decreases along with closings, and Q2 is affected by this. However, while slow acquisition of new mandates and deal rank-ups may also be factors, we believe the number is sufficient as it has increased 1.5 times compared to a year ago, despite some fluctuations.

To my understanding, the government has just completed its preliminary research. Ideally, the government and the association would collaborate to create a certification system, but currently, they are progressing separately through different committees and study groups. It's still undecided whether they will fully integrate their efforts in the future. Since the educational system will involve taking a certification exam, I believe it will require a certain amount of work. However, the impact will vary depending on the exam content and conditions.

We are not considering starting a new business organically as we don't have the resources to do so now. The market saturation is due to the increase in the number of companies, including very small-scale advisors, that have registered. In terms of the impact on our company, there are negative aspects, such as the decline of the overall image of the M&A intermediary industry, and positive aspects, as people become more aware of the importance of choosing a reliable advisor. For new entrants without brand power, the situation is extremely challenging, with no positive aspects, and recently, some brokerage firms have been selling themselves to companies in other industries. Our company can continue to grow its brand and track record in the M&A intermediary business, so we don't feel an immediate need to venture into new businesses. On the other hand, we are constantly exploring good opportunities and connections for expansion through M&A. Last year, we acquired a partial stake in Frontier Management, a consulting business. In the future, we would like to continue seeking opportunities such as overseas M&A boutiques that could strengthen our international M&A and cross-border capabilities.

Regarding tariffs, industries related to automotive, semiconductors, and those involved in import/export will see an impact on performance for both buyers and sellers, which may lead to more cautious M&A decisions. However, some industries, such as construction, IT, and elderly care, are less affected, primarily focused on domestic demand. Our company originally covers a wide range of industries, and we will work to ensure that our business activities are not skewed towards industries heavily impacted by tariffs. The most significant risk would be if financial institutions stopped lending, similar to what happened after the Lehman crisis. If an economic downturn leads to financial institutions failing or completely stopping LBO loans, it will significantly impact the M&A business, including major banks and securities firms. However, we are not currently in such a situation, and the impact is somewhat limited depending on the industry. After the Lehman crisis, independent boutique firms larger than our company, except for Nihon M&A Center, Strike, and RECOF, were all liquidated or went out of business. Even if we face a severe environment like the Lehman crisis in the future, companies like ours with strong brand power and ample cash reserves are likely to survive in the industry.