In conclusion, the various businesses we acquire as M&A companies are not necessarily the same profit margin, and this will naturally occur as we are acquiring businesses with different profit margins. And that is not a problem from an M&A perspective, as we will explain below.

GENDA, as an M&A firm, sometimes acquires companies in industries different from its existing businesses, which causes profit margins to fluctuate. For example, comparing FY2024/1 and FY2025/1, GENDA acquires a karaoke business, and since the profit margin of the karaoke business is lower than that of the amusement arcade business, the profit margin will be lower.

So, in the case of GENDA, based on the above assumptions, would a lower profit margin as a result of M&A be a negative?

Indeed, for many general business companies with only organic growth, it is negative if the same business has a lower profit margin on a year-to-year comparison. However, as an M&A firm, GENDA merges and acquires companies with different business models and different profit margins; therefore, if a company has a lower profit margin, its profit margin will naturally decrease.

So next, is it negative to M&A a company that is less profitable than the existing business?

This is the point in M&A that is a bit difficult to understand, but in conclusion, it depends on the acquisition price.

For example, Shin Corporation, which is responsible for GENDA’s karaoke business, is expected to generate more than ¥2 billion in EBITDA in the proceeding fiscal year, the highest profit in its 35-year history.

The acquisition price of the company is undisclosed, but just as an extreme metaphor for intuitive clarity, if you could buy the company for 100 million yen, would you pass on M&A because of low margins? 100 million yen is an investment that will turn into 2 billion yen a year later.

Rather, forgoing this M&A is what must be avoided as a company is required to maximize shareholder value. In other words, you can see that high or low margins are a means, not an end. GENDA, led by its Investment Committee, adheres to the basic principle of investment, which is solely to invest funds and recover more funds than they are invested.

We would also like to add that we have already seen synergies in many areas of the companies we have acquired, not only in the amusement arcade business, which is our forte, but also in the karaoke business, and these synergies have actually materialized as a result. We will disclose these results at the appropriate time once we have comparable data for a certain period of time after the M&A.

Currently, we continue to see a positive cycle of acquisitions at appropriate valuations and growth for the company.