We view the modern entertainment industry as a structure where “Contents,” “Platform,” and “Fans” are organically interconnected. Within the value chain of delivering IP contents – such as anime and film – to fans via entertainment platforms, GENDA is currently focusing its efforts on expanding our platform presence.

The essence of our business model lies in “vertical integration – leveraging our platform as a physical touchpoint to expand into high-value IP and contents.” By combining Transformational Growth through M&A with the synergy of our “Contents x Platform,” we are committed to driving long-term growth in EPS (Earnings Per Share).

There are two primary challenges regarding the acquisition of IP:

(1) High development costs and significant uncertainty regarding ROI

In-house IP development requires substantial upfront investment. Furthermore, the inherent uncertainty of whether a title will become a hit creates a structural risk – “there is no guarantee of success regardless of the capital invested.”

(2) High valuations for IP holders and content owners

Acquiring established, high-potential IP through M&A often leads to significantly higher valuations for IP holders compared to platform companies. Since our investment policy prioritizes “fair acquisition price,” we avoid overpriced M&A deals that do not contribute to EPS accretion. Consequently, such targets are less likely to be prioritized.

On the other hand, platform business exhibits the following characteristics:

• Stable Cash Flow: Backed by a long track record of operations, this segment generates consistent and reliable cash flow.
• Reasonable Valuations: Due to business succession needs and market maturity, platforms can be acquired at more reasonable valuations compared to “entertainment contents” or IP holders.
• High Cash Conversion Efficiency: The business structure allows for high cash recovery efficiency – with an EBITDA to FCF (Free Cash Flow) conversion rate of approximately 50% for amusement arcades and 70% for karaoke rooms.

This aligns perfectly with GENDA’s investment discipline of prioritizing “fair acquisition price” and “EPS accretion,” ensuring a steady pipeline of deals that enhance shareholder value.

  For these reasons, our primary strategy is to steadily execute a roll-up of platforms that offer attractive investment potential. As a result of this cumulative effort, our network now spans over 1,000 locations in Japan and more than 13,000 in North America. With a network of this magnitude, GENDA has become an “essential customer touchpoint” for IP holders, creating an environment where it is easier to forge close-knit partnerships. It is important to note that this was not designed as an IP strategy from the outset; rather, it is a competitive advantage gained through a disciplined series of capital-efficient M&A.

Regarding the full-scale acquisition of IP, our policy is to consider this once we have secured a sufficiently robust platform network.