M&A ADVISORY

Carrying the value and intent of an inn forward.

From hotels, ryokan and vacation rentals to tourism-related businesses. M&A that looks closely at the value of a business and carries it into the future.

M&A in the lodging and tourism industry is not simply the buying and selling of real estate or a business. It is an important management decision that passes on to the next generation the ties with a region built over many years, the trust of guests, the employment of staff, the history of a property and the intent of its owner. ARK& provides M&A advisory services centred on the lodging and tourism industry, including hotels, ryokan and vacation rentals. Drawing on our knowledge of lodging operations, earnings improvement, real estate and business succession, we connect those looking to transfer a business with those looking to acquire one, supporting a smooth succession and the sustainable growth of the business. You are welcome to talk to us even before you have decided to sell or buy.

01 / YOUR CONCERNS

Does any of this sound familiar?

If you are considering transferring or selling

There is no successor, and you are uncertain about continuing the business
Ageing and labour shortages are making the business harder to run
It is difficult to secure the funds needed for an ageing building or equipment renewal
Profitability has declined and you are considering improvement or turnaround
You want to pass the business on while protecting jobs and ties with the region
You are unsure how to set a fair price or find the right buyer
You want to talk through whether to sell or carry on

If you are considering acquiring

You want to enter the hotel, ryokan or vacation rental business
You are looking to expand an existing business or move into a new region
You are searching for a profitable property with room to grow
You want to acquire an existing property and raise its value through renovation or better operation
You want to understand the condition of the facilities and what further investment is needed
You want to discuss the operating structure and business plan after acquisition

Whether you are transferring or acquiring, we listen carefully to the situation of the business and what you are hoping for, and support an M&A that fits your purpose.

02 / WHAT WE VALUE

Three things our M&A advisory holds to.

Specialist understanding of lodging and tourism

Seeing the real value of a lodging business, which financial statements alone do not show.

The value of a lodging property is not decided by revenue, profit or an appraisal of the real estate alone. Occupancy (OCC), average daily rate (ADR), RevPAR, seasonality, sales channels, the operating structure, the condition of the facilities, the need for refurbishment, operating licences and rights relating to hot spring use — many factors bear on the value of the business. We organise the present state and future potential of the business from several angles, taking the characteristics of the industry into account, and support the search for terms both sides can accept.

Respecting the owner’s intent and the continuity of the business

Transferring a business means carrying the value already built into the future.

Hotels and ryokan are an important part of a region’s history and culture, its employment and its tourism industry. Beyond the transfer price, we give weight to the employment of staff, existing bookings, relationships with suppliers, ties with the local community and the continuity of the business. We help organise the terms of succession and the matters to be handed over, so that the property and the business can keep growing after the transfer.

M&A support built on transparency and fairness

Respecting both sides, so the process can be approached with confidence.

An M&A deal moves forward by reconciling the wishes and conditions of the transferring and acquiring sides. As an intermediary we respect the position of both, and explain the terms of the transaction, the fee structure and any possibility of a conflict of interest. Through the careful handling of confidential information, checks on prospective buyers and, where needed, work with outside specialists, we aim for a transparent M&A process.

03 / SCOPE

Businesses and transactions we cover

Businesses we cover

Hotels and business hotels
Ryokan and hot spring ryokan
Vacation rentals and simple lodgings
Resort and glamping facilities
Operating and management companies for lodging properties
Tourism facilities and tourism-related services
Other businesses related to lodging and tourism

Main M&A structures

Share transfer

Control of the company is passed on by transferring its shares.

Business transfer

The assets, contracts and business rights relating to a lodging property or a particular business are transferred within an agreed scope.

Other succession structures

Depending on the circumstances, we also consider corporate splits and other succession structures, working with the specialists required.

* The sale of real estate, leases, operating licences and the succession of various contracts each require their own checks and procedures depending on the structure of the transaction.

04 / PROCESS

How the process works

STEP 01

First consultation

We ask about the present state of the business, the purpose of the transfer or acquisition, and the terms and timing you have in mind. You are welcome to talk to us even if you have not yet decided to sell or buy.

STEP 02

Advisory agreement and key disclosures

We explain our role as intermediary, the scope of our work, the fee structure, the term of the agreement, termination conditions, confidentiality and conflicts of interest, and enter into the advisory agreement once these are agreed.

STEP 03

Business analysis and terms

We organise financial records, occupancy history, facilities and equipment, contracts, licences, borrowings and personal guarantees. Taking the characteristics and profitability of the business into account, we support the consideration of price and terms.

STEP 04

Finding and matching counterparties

We search for prospective counterparties against your conditions and check, as far as we are able, their business policy, ability to raise funds and ability to complete a transaction. With confidentiality in mind, disclosure and meetings proceed only after the necessary consents and steps.

STEP 05

Negotiation and basic agreement

We organise the price, what is being transferred, employment, existing contracts, liabilities, personal guarantees and operating licences, and support the letter of intent and the basic agreement.

STEP 06

Due diligence

For the financial, tax, legal, business, real estate and equipment reviews carried out by the acquiring side, we support the preparation of materials, responses to questions and coordination with specialists.

STEP 07

Final agreement and closing

From signing the final agreement through settlement and the transfer of the business or control, we move the process forward together with the parties and their advisers. Where needed, we confirm the handover of staff, bookings, suppliers, equipment, licences and personal guarantees.

STEP 08

Support after the transfer

Alongside M&A advisory, ARK& also offers operational improvement, revenue management, opening and regeneration production, and building and equipment management. If you would like support with management or operations after the transfer, we will propose this under a separate agreement and fee structure.

05 / INTERMEDIARY OR FA

Intermediary or financial adviser

There are two main ways of supporting an M&A deal: acting as an intermediary, or as a financial adviser.

M&A intermediary

Standing between the transferring and acquiring sides, communicating with and coordinating both as the deal moves towards completion.

FA (financial adviser)

As a rule contracting with either the transferring or the acquiring side alone, and advising and supporting negotiations from that client’s position.

This service of ARK& is M&A intermediation. Because the wishes and interests of the two sides may not align, we explain our position and any possibility of a conflict of interest in advance. Where appropriate, we recommend that you also consult an independent lawyer, tax accountant or certified public accountant.

06 / FEES

Advisory fees

Free first consultation, fees on success only

From the first conversation through to completion, ARK& works on a success-fee-only basis that keeps up-front costs down.

Item	Fee
First consultation	Free
Retainer	¥0
Interim fee	¥0
Monthly fee	¥0
Time charge	¥0
Success fee	Only on completion

How the success fee is calculated

We use a progressive Lehman formula based on the consideration for the share transfer or the business transfer.

Band of consideration	Rate
Portion up to ¥500m	5%
Portion above ¥500m up to ¥1bn	4%
Portion above ¥1bn up to ¥5bn	3%
Portion above ¥5bn up to ¥10bn	2%
Portion above ¥10bn	1%

Minimum success fee: ¥1,000,000 (excluding tax) per contracting party

* The success fee is payable 50% on signing and 50% at closing.
* Unless separately agreed, bank borrowings, repayment of shareholder loans and directors’ retirement benefits are not automatically added to the consideration.
* Where we enter into advisory agreements with both the transferring and the acquiring side, a success fee arises with each. We explain the amount received from each side, how it is calculated and the payment terms in advance.
* Fees for outside specialists such as lawyers, tax accountants, certified public accountants and architects are not included. Where these are required, we explain the scope and cost in advance and they are borne separately once agreed.

Worked example

Where the consideration is ¥30,000,000

¥30,000,000 × 5% = ¥1,500,000 (excluding tax)

If both the seller and the buyer enter into advisory agreements with us on the same terms, the fee is ¥1,500,000 (excluding tax) each, ¥3,000,000 (excluding tax) in total.

07 / OUR COMMITMENTS

What we do so you can talk to us with confidence

So that an M&A deal can be approached with confidence, we hold to the following.

Proper handling of confidential information

Without the prior consent of the transferring side, we do not disclose information that would identify the business — such as the name of the property or the company — to prospective counterparties.

Checks on prospective buyers

As far as we are able, we check the identity of prospective buyers, their ability to raise funds and complete a transaction, and their policy on continuing the business.

Disclosure of fees and conflicts of interest

We explain and disclose the fees we receive from each side, any referral fees from third parties, and any interests held by us or by related parties.

Working with specialists

Where specialist judgement is needed on legal, tax, accounting, architectural, equipment or licensing matters, we work with specialists in each field.

Attention to transaction risk

We check and organise matters that will have an effect after the deal — personal guarantees, liabilities, staff, existing contracts, licences and the condition of the facilities — from an early stage.

* We do not guarantee any valuation, transfer price, completion of a transaction or earnings after a transfer.

08 / SME M&A GUIDELINES

Compliance with the SME M&A Guidelines (3rd edition)

In line with the intent of the SME M&A Guidelines (3rd edition) published by the Small and Medium Enterprise Agency, ARK& carries out its M&A advisory work properly and transparently. We place weight on pre-contract disclosure of key matters, explanation of conflicts of interest, confidentiality, checks on prospective buyers, and the handling of personal guarantees and contractual risk, and work to maintain a structure you can rely on.

Our policy on complying with the SME M&A Guidelines (3rd edition) is published separately as a declaration of compliance.

Read the declaration of compliance

09 / CONTACT

Talk to us about succession and M&A

Carry the business you have built into its next future.

“We have not decided whether to sell.”
“We would like to know what the business is worth.”
“We want to talk about succession.”
“We are looking at acquiring a lodging property.”

You are welcome to talk to us at that stage. Drawing on our specialism in lodging and tourism, ARK& supports M&A that carries a business to its next ownership, with regard for the owner’s intent and the potential of the business.

ArkAnd LLC.（ARK&）

Address: TASUKI PRIME SANGENJAYA 3F-3, 4-18-15 Taishido, Setagaya-ku, Tokyo 154-0004, Japan
TEL: 03-6822-6515
MAIL: info@arkand.jp
Website: https://arkand.jp/