In conclusion, the purpose is to enable us to issue corporate bonds and to diversify the financing sources required for M&A companies. We have newly obtained a JCR rating of BBB+ (stable), which is an investment grade rate.
Corporate bonds are generally issued for the purpose of refinancing existing loans, and in our case, we mainly expect to use them at the time of execution of M&A, as described below.
With “Continuous Transformational Growth” through M&A, we execute M&A with financing repeatedly. Practically, we transfer the amount of the share acquisition in a lump sum to the seller on the date on which the M&A is completed.
When executing a debt financing, it is common to borrow funds from a small number of banks on the payment day through a “bridge loan,” which is a short-term loan, and then, several months later, to execute a “permanent loan” by refinancing the bridge loan with a number of banks through a syndicated loan or other means for the same amount on a long-term basis.
It will become possible to use corporate bonds for this permanent loan in the future. Companies which conduct many M&As around the world utilize corporate bonds as a means of financing their M&As. From now on, we will be able to utilize this global and common financing process for M&A.
For banks which provide the above short-term bridge loans for M&A, the ability to refinance with a permanent loan is a key factor when they decide whether or not to lend.
In the past, the only way for us to make the loan permanent by borrowing was to borrow from banks, which is indirect financing. However, since we will be able to access the corporate bond market of about 15 trillion yen, which is direct financing, on our own from now on, we believe that it will be possible for banks which provide bridge loans to make credit decisions more flexibly.
Since we got listed, we have announced 22 M&As in 2023 and 11 in 2024, the highest number of M&As executed as a listed company in Japan for two consecutive years. We have succeeded in conducting M&A at the top speed in Japan.
To conduct M&A, of course, we need to prepare the funds required to acquire the share by the payment date.
We have mainly financed such funds by borrowing from banks. In other words, we have succeeded in borrowing from banks at the top speed in Japan, too.
As a result, in fact, we have succeeded in borrowing from 68 financial institutions including banks and leasing companies at present (as of the end of February 2025).
Besides, we believe that we have established a high degree of trust with each of the banks because our purpose of loan is “funds for M&A,” which generally requires more complicated examinations than general business funds.
Furthermore, when we ask for examination of loans for M&A, a set of materials related to due diligence (which is not disclosed to the stock market), which is the result of evaluation on the target company of the M&A, is also submitted to financial institutions such as banks. These materials will be also reviewed to judge whether we can borrow or not.
Based on the undisclosed information regarding the details of each M&A project in the past, the banks have approved a loan to us so fast in their internal decision-making process. We flatter ourselves that this is because they fully understand the appropriateness of our price for M&A, our discipline and the reproducibility of post-M&A PMI, and we have successfully established a relationship of trust with them.
Creditors need to eliminate downside risk in particular because the upside from lending is limited. However, we passed such examinations and succeeded in borrowing.
After passing this credit judgment of financial institutions such as banks and leasing companies in indirect financing, we received an “investment grade” rating this time as a result of the examination by JCR, one of the largest credit rating agencies in Japan, which is a guideline for the investment judgment of creditors in direct financing.
We are a growth company in our seventh year of operations and have been continuously conducting M&A, which is our core business. As a result, the absolute amount of “goodwill” is larger than that of a general company. We are proud that the fact we received a “BBB+,” which is the same rating as that of TOMY Company, Ltd. and FUJI KYUKO Co., Ltd. in the entertainment industry, means that the safety of discipline in M&A is additionally guaranteed.
As mentioned above, in addition to accelerating M&A activities through the diversification of financing through the issuance of corporate bonds, we have received various approvals from financial institutions which are lenders in indirect financing and the credit rating agency which is a guideline for lenders in direct financing after being examined for the solidity of the purpose of loans and the downside risk in particular. We believe that this fact means our M&A is a solid investment with limited downside (after the undisclosed information was examined) for our shareholders who will enjoy the upside of transformational growth through M&A, and we hope that this will further reassure our shareholders and encourage them to invest in us. We would like to take this opportunity to express our gratitude to our shareholders.
Please see the news release issued by JCR below.