Nihon M&A Center Holdings Inc. (2127.T) Q2 FY2026 Earnings Call Transcript & Summary

[Interpreted] Hello, everyone. Today, we are holding a financial results briefing session for the first quarter of FY 2025. Thank you very much for joining this session. This session is broadcasted simultaneously to audiences in the entire world. I believe it's midnight in the U.S., and it should be early in the morning in Europe. Thank you very much for joining this session despite the time difference. Today, including myself, we have the Vice President and the CFO of the Holdings, Mr. Naraki. And also, we have the Senior Managing Director of the Holdings and the President of Nihon M&A Center, Mr. Takeuchi. So we have 3 members to explain our results. Could you introduce yourself?

Sure. I am Naraki. I am the Vice President and the Director of the Holdings. Thank you.

I am Takeuchi. I am the Senior Managing Director of the Holdings.

Thank you for the introduction. We have 3 members today. So we hope to provide brief explanations. We would also like to communicate how the atmosphere is, and we would also like to talk about our financial positions, and we hope to receive such questions. To start with, we would like to talk about the summary of how we have performed. For the first half of FY 2025, both sales and ordinary profit performed strongly. This is indeed thanks to the network people and the shareholders' support. We indeed thank all those who support. And as a result, on October 23, we announced an upward revision to the first-half earnings forecast. Compared to the last year, we have had a significant increase in both revenue and profit, and we substantially exceeded the original earnings forecast. Sales, JPY 22.5 billion, which is 21.5% higher year-on-year. And compared to our original forecast or compared to our forecast, our achievement rate is 112.4%, and ordinary profit was JPY 8.5 billion, which is up by 43.1% year-on-year. The achievement rate in ordinary profit is 126%. Ordinary profit ratio, the margin was 37.9%, up by 5.7 points year-on-year. We think that these results are quite favorable. About sales, we attribute this to closing many transactions and the average sales per M&A. Both of these factors improved, and that worked to improve sales. About ordinary profit, since we grew in sales, that was positive for ordinary profit. And at the same time, we optimized cost, and we also optimized the ratio of client-facing employees. To talk about our performance in the first half, we think it's really important to compare the first half to the whole year forecast. At the bottom of this graph, in green, we indicate our full-year forecast. The full-year forecast for the sales is JPY 46.3 billion. And compared to that, we've achieved 48.8% in the first half. And about ordinary profit, our whole year forecast is JPY 17 billion, and we've achieved 50.4% of that. Therefore, in the second half, we're going to manage our company even more strongly. To break down how we did in the first half, sales, JPY 22.5 billion, were 21.5% higher year-on-year. One of the reasons for this is the number of transactions closed, which was 488. This number was higher year-on-year by 7.5%. This was quite significant. Also, M&A sales per transaction also improved, and that was JPY 44.6 million, and this figure was higher by 12.6% year-on-year. About the reason why we have a higher number of transactions closed, in the Nihon M&A Center, they employed quite successful tactics. Improving the successful closing rate was the focus and the reason why they held kickoff meetings at the beginning of negotiations to talk about the schedule to make sure that all the stakeholders are on the same page, and also to identify potential issues in the process. Relatively inexperienced consultants can handle projects well, thanks to these kinds of initiatives, and also sell-side owners, due to the issue of inappropriate buyers, they are more cautious than before. Therefore, we have to present solutions to many issues earlier than previously. Otherwise, there are cases where we cannot close deals. And we think that we've been taking the right actions. Also, about the improvement in M&A sales per transaction, we've established a specialized department receiving mid-cap mandates, and this is a supporting department. This department gives suggestions to all departments. And thanks to their effort, we believe that we have received many mid-cap mandates quite successfully, and that contributed to the improvement in M&A sales per transaction. About the small-scale deals, we've been introducing and referring them to Batonz. So there will be online handling of such cases. These factors were translated into a favorable ordinary profit. Of course, we've paid attention to optimizing cost. Starting from this year, Naraki-san is Vice President and also CFO, and he's been paying attention from those positions to optimize costs. About our results in the first half, I would like to ask our CFO, Mr. Naraki, to explain.

Sure. Sales, cost of sales and ordinary profit, and SG&A, I think that we have explained quite a lot. But from the first quarter, as you see on the right-hand side, we have changed the classification of cost of sales and SG&A. As a result, as you see on the right-hand side, about cost of sales, minus JPY 943 million, and SG&A increased by JPY 943 million in the first half of the previous fiscal year. We used to include in the costs those that are not about our sales representatives. However, we've reclassified our personnel, so those people are now recorded as SG&A. On to the next page, despite that kind of reclassification, to show you our income statement for the first half, if you look at the cost of sales, the third row from the top, we have JPY 8.6 billion in cost of sales this year. And this is 38.1% in the ratio. Last year was JPY 7.5 billion in the first half. The cost of sales ratio in the first half of last year was 40.4%. This is partially thanks to our favorable sales progress. But we are having favorable sales progress, and we are also improving in the cost-of-sales ratio. About the referral fees, this time, the referral fee and outsourcing expenses ratio was 14.2%, slightly higher than last year. If you pay attention to the SG&A, this time, 24.7% last year compared to 27.8% last year, the SG&A this time was JPY 5.5 billion compared to JPY 5.1 billion last year. We've been reducing the ratio of the SG&A compared to the same time last year.  Next is a summary. This is for mid-cap. We have been able to achieve results for mid-cap companies, and we have been able to achieve upside by far for M&N sales per transaction. Looking at fiscal 2025 March, sales per transaction were JPY 47.6 million. And compared to last year, it was JPY 40.4 million. This is an increase of 17.7%. M&A sales per transaction out of this, large transactions closed were 32. Last year, it was JPY 19. This is an increase of 68.4%, which is a significant increase. Thank you very much.  Next, I would like to continue to talk about the leading indicators. First, looking at the number of new sell-side mandates, it was 327. Year-on-year, it was a decrease of around 16%. Looking at the mid-cap mandate, it also decreased. And they have decreased. But I don't perceive this as something that's so negative. I believe there are 2 topics.  One, in the first half of this fiscal year, we had to focus on performance. We had sufficient outstanding mandates, and therefore, we wanted to achieve results first. And this year should be a year to revive the performance. We focused 100% on achieving performance. Therefore, we're not paying as much attention as we should have to new mandates. Therefore, for the second half and towards the next fiscal year, we would like to recover this. And therefore, we are not so worried. The other topic is that we are relatively selective about the transactions, very small transactions, or poor performance companies.  So, for companies that are hard to sell, we are selective because both companies will become unhappy if a transaction is closed. Having such mandates means harboring wrong expectations. If the company is not sold, then our actions will be delayed and delayed, and that will cause unfortunate results. So M&A is difficult. We need to communicate that first.  Also, for our side, when we receive mandates and accept mandates, we do matching appropriately, and we need to achieve results and close transactions. Otherwise, there will be so much burden on our work, and then we will fall into a loss-making business. So for both companies, this is not favorable. Therefore, we are very selective. We have negotiations and discussions and receive mandates. And going forward, this trend will increase. That's what I expect. So we'll be narrowing down and focusing and being selective about mandates.  For the companies that come to us to consult with us, we will not cause them trouble. We will be able to improve our productivity at the same time. This is what we would like to continue, but this is just something that we have just started, and there is such an impact. This impact, I expect to become bigger going forward. And for mandates, we are not worried. For buy-side mandates, it's a slight decrease. It was 388, and it was a negative 4% year-on-year. As a result, a number of new transaction negotiations were 297. It was negative 5% year-on-year.  I would like to use this diagram. This is a usual diagram, but it has been simplified a bit to make it easier to see. Looking at the new sell-side mandate, it has decreased by around 16%. In the matching phase, new buy-side mandates show a slight decrease. In the negotiation phase, new transaction negotiations were roughly negative 5% year-on-year.  However, looking at the bottom right of the slide, there is a lead time. We are doing great here. So, for the preparatory period, it used to take more than 90 days, but we have decided to reduce this to 60 days, and we have been able to achieve that. Looking at the matching phase lead time, we would like to shorten this. We would like to start taking initiatives for this. This is something I always talk about. This is a number. So please refer to it by yourself. I would like to omit explaining this.  From this point onwards, I would like to hand over to Mr. Naoki to talk about the balance sheet. 

About the balance sheet, please pay attention to the top half about the total assets at the end of the second half, JPY 60.5 billion we had in total assets. At the end of the previous fiscal year, at the end of March 2025, this was JPY 61.7 billion. So there was a decline of JPY 1.2 billion. Compared to the end of the previous year, there are more outstanding payments, including incentives, and that's the reason why there is a decline in assets. But we also would like you to pay attention to the latter half, the liabilities plus net assets.  At the end of the second quarter, the total of net assets was JPY 48.3 billion compared to the end of the previous fiscal year. There was a positive JPY 752 million. So there was a 3% improvement in net assets. To talk about the number of employees, headcount, as we've written, the recurring status of M&A consultants is quite favorable. However, there is an increase in turnover, especially among employees with tenure of no more than 3 years. So this remains our issue.  On the right-hand side, we are presenting a new classification of our personnel, especially for M&A consultants at the end of the previous fiscal year. Compared to the end of the previous fiscal year, there was a net increase of 10 M&A consultants this time. 97 people joined our company during this period. However, turnover or reshuffling of departments occurred, and there was a decline of 87 from that. And therefore, the net increase was 10.  I would also like to talk about the new classification. According to the new classification, M&A consultants, as you see in the notes, are the pure sales representatives at Nihon M&A Center and the overseas local entities. The next category, M&A support, they are the people who are recognized as our cost of sales, and they are the people at our value promotion department who the specialized CPA and so on.  Also, we have Japan PMI Consulting, TPM division, and also corporate value laboratory and Special People Association, SPA, who do the valuation work who provide support. These people are recorded as our cost of sales, and the remaining M&A support is recorded as SG&A. So once again, we reclassified our personnel, and that's been applied from the first quarter.  On the next page, we are showing how we were according to the previous classification. We're making sure we show our personnel transition according to the former classification. And you can compare this with the new classification.  Next, I'd like to talk about shareholder equity and shareholder breakdown. Looking at shareholder return contribution, we are providing dividends of JPY 29, including a special dividend of JPY 6. We are going to continue this from last year. And as a result, the payout ratio for the fiscal year ending March 2026 is expected to be 83.6%. Continuing on from last fiscal year, we are maintaining a high level. As described at the very bottom, during the midterm management plan period, we will continue with a dividend payout ratio of 60% or more.  This is about ROE. As the chart shows, for the fiscal year ending March 2026, we are expecting to land at 22.9%, which is a 20% level. In March 2024, we have done a buyback of JPY 1.4 billion, JPY 14.9 billion, and we are going to be maintaining a 20% level. This is about share ownership. The individual shareholders' ratio has declined, and the institutional investors' ratio has increased. In the pie chart at the right top, we have an individual ratio. It stands at 30.7%. Compared to the last time, it decreased by 3.6%. Against that, looking at financial institutions, it stands at 32.2%, which is an increase of 3.6%. And for foreign institutions, 28.9%, which is a 0.9% increase compared to the last time. That is all from me. 

Thank you very much. And now we'd like to talk about the midterm management plan and others. This fiscal year, in terms of the forecast, compared to last fiscal year's forecast, we have lowered our forecast this fiscal year. There are 2 objectives. One, we'd like to return to our customary cycle of attaining results targets. In the second quarter, we have been able to recover very much. And now we are going into the third quarter. We'd like to make collective efforts as a company to achieve results. It's not that we will be able to fully recover in 1 year. But as much as possible, we would like to return to our customary cycle of attaining results targets. We'd like to bring a peak in the Q3 and take pressure off in Q4 to be able to prepare for next fiscal year. So we'd like to return to such business management. The second is to regain stakeholder confidence, especially employees, by reaching targets and gaining confidence. I think this is something that's extremely important. In that sense, in Q2, we have been able to achieve good results. I do believe that many employees have regained confidence. Going into Q3, we'd like to accelerate this process.  As a result, the midterm management plan, which was announced, we are aiming to achieve upside. We'd like to continue to achieve more and more. First, sales, I believe, are the most important. And therefore, we'd like to generate sales. And this time, we have been able to make an upward revision with sales increase, and I'm very happy about this. As a result, profit, we will be achieving upside, and we would like to build such a structure.  Since we are a holding company, we have other related businesses besides Nihon M&A Center. And about the updates on related activities, we believe that these kinds of relevant activities are starting to be more favorable. That is non-M&A sales ratio has been growing little by little. To look at each item one by one, TOKYO PRO Market is quite successful. There are many J-Adviser companies, and of all the J-Adviser companies, we've been the top in supporting the largest number of TPM IPOs for 2 consecutive years. We would like to generate star companies nationwide to contribute to local and national regeneration. Therefore, local banks and accounting firms have been supporting and cooperating with us. And we believe that that's part of the reason why we've got this result. The PMI consulting business is the most important for us in this category. This business is really growing well. If we can have more people, we believe that this business can grow faster.  SME agency established the PMI guidelines for SME, and the FSA also wants SME/M&A to be more active. So they've also revised their guidelines. And we've been doing the PMI consulting business from the early phase in the industry. Therefore, we've been improving our track record of providing PMI from 66% to 93%. This year's target is quite high at 93%. But already in the first half, we've done 59%. We hope to achieve this target this fiscal year. The new buy side, we would like all the new buy sides to receive PMI consulting service. That way, we believe that the transactions will be successful.  About our overseas business, we feel that our overseas business is quite steady this year. And overseas business closed their fiscal year in December. So they finished the third quarter, and in the fourth quarter, we are expecting good results to come out. Starting from this fiscal year, we believe that our overseas business will get back on the growth track. Our operation in Singapore is having its 10th anniversary. Therefore, I visited 5 countries, and I would like to learn more about those operations. The fund business is also going quite well, be it the Japan Investment Fund or the search fund. We now have 3 search funds. And also, we have 2 in negotiation. By the end of this fiscal year, we believe that we will be able to have 6 or 5, or 6 to be established.  About our A2G capital, the preparation for exit is going on, as features, DX, digital transformation, and AI transformation, and full usage adoption of AI. This month, Salesforce, Dream Horse, we had around 4 people participate from our company. In the past 3 years, we have been participating every year, and we are receiving great stimulation and direction as well. DX and AI, we'd like to continue to promote them.  Seminars, we are making good progress as well. And number of participants compared to last year was totally different. There are so many participants. They are much more serious. And this is something that we observed. Next year, we'd like to host much more enriched seminars to identify direct mandates and continue to hold seminars. For direct, it's a challenging situation right now. The response rate is very low for direct. Therefore, we would like to do area marketing or industry marketing. This is what we're doing. And area marketing, regional marketing, we are very successful, especially in Ibaraki. It's very, very interesting. We have a radio. We have our personality. And the personality, I'm talking about Miyagi [Suguru's] business management paradise, and we invite famous business management and top management, and we are building a network of business owners and managers. We are starting to see success in some of the regions already. As for branding, Guinness, we have been recognized by Guinness World Records for 5 consecutive years. And we'd like to continue with this for the coming 5 years, 10 years, and more.  We'd like to continue to make efforts and integrate the report. I think it's next week or the week after, they will be released both in Japanese and English at the same time. We are putting a lot of focus on this.  I would like to ask the investors, you can choose Japanese or English. Please take a look at our integrated report. We have dedicated a lot of effort to this. And last of all, this is the industry trend. I have talked about this many times already. M&A intermediaries are increasing. And against such a backdrop, morale is declining, or quality is declining. In order to discuss that, the SME agency will be revising the guidelines for the second time. Not only for the companies, individual players, M&A players, skills, how should they be? A skill map has also been developed by SME agencies. The major trend will be from this year to next year. Based on the skill map, the qualification system may be launched. That's how I feel. This is something I perceive as positive. Also, about inappropriate buyers, it's been talked about in the media. So, as an industry, we are taking quite strong actions. For example, creating the format of contract documents and creating a list of inappropriate buyers. These are the actions we're taking. And of course, as a leading company, we would like to do even more, and we are doing even more than that. We should not be satisfied with being aware of these issues. We should fulfill our accountability. However, just providing an explanation is not good enough. We should also leave results, good results, and we have to be responsible about delivering good results as well. About delivering good results, it could be about releasing the personal guarantee, but that's not the whole. We want to make sure that everybody becomes happy in M&A. The keyword here is a success. So success is the keyword for the responsibility we have. Therefore, we're going to, of course, take action on inappropriate buyers. And besides that, PMI representation, warranty insurance, and on other fronts, we're going to take more comprehensive measures. Also, in the industry, academia, and government collaborations, we believe that we have to utilize such collaborations to take comprehensive measures. CPA or Chief Public Affairs Officer is Yokoi-san. We've established this position, and he's been quite powerful. We feel that we've been receiving much guidance from him and also from the SME agency. And on the academia front, in April, the M&A research group was established as an academic society. By enhancing our collaboration of trip parties of industry, government and academia, we would like to develop this industry into a more healthier one, more healthy one. Last but not least, the company for the seller is the life of the seller itself. And there are employees working for that company. These people spend their lives at their company. Therefore, it's important that everybody becomes happy through the M&A we support. We have to protect as many companies as possible. In that sense, we would like to deliver the optimum and the best M&A. We would like to have the best transaction closure, and we would like to close as many as possible of such successful closures. And we hold impressive and emotional closing ceremonies, and we take the lead in the PMI activities. Also, we support management in creating their autobiography. And we want to make sure that the buyers can manage the company with that confidence through the provision of representation and warranty insurance. We would like to support the second life of the former seller through the NEX Navi. This is how we would like to achieve the M&A so that our customers can be satisfied with it. This is the end of our presentation, and now we are going into the Q&A section.

Thank you very much for the presentation. Now we are going into the Q&A. We accept questions through the chat function. And due to time constraints, we may not be able to respond to all the questions. Now we're going to start the Q&A part. We believe that you are still writing questions. So, based on the questions we have received in the past interviews, we have prepared some questions. So we would like to go through the questions we have received in advance. The guideline was revised at the end of August last year. It's been a year since then. Are things settled down now, including the procedure of the internal procedures and the impact on productivity? And do you feel that the quality of the business has improved when you look at the entire industry?

I would like to provide a brief answer to this. And then, Takeuchi-san is going to provide his own experience. I believe that the productivity issue is basically settled because it's a matter of how much time is spent and getting accustomed to it. About the business quality, I believe the business quality cannot improve suddenly. However, we feel that the employee morale has improved. However, there is still a long way to go. Therefore, as a director and also as a leading company, we would like to continue to make efforts. However, at many boutique companies, they need to improve the quality of the business and their morale, their awareness.

About this, we feel that each management of the boutique companies now has better awareness and better morale. We have to make the entire industry an even better one, and that requires efforts on the side of each company. This is the sense of awareness that the management of boutique companies now has, and that's how I feel. However, that does not directly lead to an immediate improvement in the quality of the business and the morale. Therefore, we would like to continue to do what we've been doing, including education and so on.

What do you think about the impact of the revision on productivity?

Okay. To talk about how things are at Nihon M&A Center about important contractual terms and about risk items at Nihon M&A Center, we've been explaining these already before the introduction of the revision. However, with the revision, these contents are now documented, and now we have a format. And we've been introducing those revisions. But this is not a new thing to us. So we don't see any impact from the revision. Rather, we believe that we now have better visibility, which is better for the awareness of the entire employees. So we believe that we have now become more lean compared to before. That's the atmosphere I feel in the company.

The next question. It seems like M&A consultants' retention has some issues. What are the factors? What are the countermeasures you're thinking of? Also, are there any issues with the recruiting environment? Have there been any changes in the attributes of the applicants?

This is a very important topic. First, I would like to answer. Looking at the hiring environment, it hasn't gotten worse. Rather, looking at new graduates as of now, for the graduates who will be graduating in 2026, the Thinktank Research Consulting segment, we are #4 in terms of popularity. Daiwa Research, Ain Consulting, Accenture. And then after that, we follow. And then Nomura and then Nomura Institute and Mitsubishi Research Institute. We are very popular. Looking at this year's internship applications, we have received more than 6,000 applicants. It was close to 7,000 applicants. That's what I'm hearing. Therefore, our company remains to be very popular and very high. Therefore, in terms of the environment, there are not many environments. But for mid-career, the reputation of the industry there is an issue with that. 3 to 4 years ago, the M&A industry had social missions and looked cool and good income, blue ocean; it used to be a very, very popular segment. But there is a media report about inappropriate buyers. And there are many companies that are trying to generate so much money.

How is the morale, and how did such reputations start to emerge?

At around the same time, for example, consulting companies like Bakerrent, Accenture, and others, had hired people massively. Nihon M&A's advantages, we are different. We need to communicate that to the mid-carriers market. We have come to an era where marketing is very important. Against such a backdrop, we are taking measures. For example, I myself or Takeuchi-san, or Suzuki-san explained in the explanatory session ourselves and agents' explanatory sessions, we host them ourselves sometimes. We are taking measures as such. And also referrals, we are focusing on this as well. Therefore, we do not have such a big concern. And the first part of the question about retention is an issue indeed. Compared to last year, looking at the people who left, it has deteriorated slightly. There are 2 reasons, I believe. This is not always bad. What I mean is that the mode of the company is recovering to how it used to be, our company. We are very particular about numbers. We want to grow. We are a growth-oriented company. This is because of 35 years of history, and this is exactly our DNA in the past 35 years. However, in 2021, there was a scandal, and from 2022 to 2024, during these periods, there was low growth, a stagnation era for us. During this time, members who joined during this time with less than 3 years' tenure believe this is how the company is. They believe this is the DNA, and this is the essence of our company. However, in 2025, we have moved on to a new chapter. We have a slogan to start growing again. We are accelerating, and we are recovering to how we used to be. And then they are surprised. So in the past 2 to 3 years, these new joiners have become surprised. So they think what happened to this company? The atmosphere is different compared to before, and then they leave. So this is what is happening. People who have been with us for less than 3 years are the ones who are leaving the most. And one point is that compared to our speed, we need to replace people who are slower compared to our pace. This is something we capture as something that's positive. But misunderstanding and people who are really high performance, when they leave, that's a problem. Therefore, from the second half, we'd like to follow up fully. For example, after 6 months of joining the company, Takeuchi-san, we call it key talk. Any questions will be given to Takeuchi-san, and he will respond to all the questions, or even for the first-year joiners, we hold such sessions. And for the second year and third year joiners, I will be answering all the questions. They can ask any questions. We will follow up very much in detail, and people who are passionate, who are high performance, we would like to make sure that we prevent them from leaving. Takeuchi-san, would you like to add anything?

There might be some overlap. Simply said, for hiring, we have confidence. In mid-carriers in a year, 5,000 applications are sent to us. We'd like to be selective and concentrate on talented people. For the M&A industry overall, there might be some concerns, but we are the biggest company in the industry. This is a very big branding. And this is a very big advantage in terms of recruitment. I have very strong confidence about this. But on the other hand, looking at people who leave, this is a big challenge. We recognize this, especially in the past 2 years, people who left, we are plotting them. Members who have joined us less than 3 years they account for 2/3, 66% of the people who leave. That about half are changing jobs to another industry. Nihon M&A Center hires people who are not experienced, who are inexperienced in the M&A industry. We develop these talents to be able to do work in M&A. And they come from a different industry. And then within 3 years, they leave to go to work for another industry, which means in one word, they're not successful in hopping jobs. So, as Miyake-san mentioned earlier, after 6 months of joining, this is a very big break point. The top players are the people we hire from different industries. And within 6 months, if they are not able to achieve performance, they lose confidence. They start to feel that, oh, maybe I'm not good at this industry, so I should change. That's how I was myself. So after 6 months. So starting this month, every month, I will be having meetings with all the members to generate confidence. Another point is 1 year later after joining. One of the major reasons why they changed jobs is that they like M&A. They like the M&A center very much. But the department they're working at or the mission, they don't really match, or the sense of value does not match with the boss or the people they are working with. So, 1 year after joining the channel, general managers will be taking the lead to hold matching meetings. We will have such thorough discussions. By introducing this from the second half of this year, the volume zone of the people who leave, these are the joiners within 3 years' time. We need to take such measures and how a net increase expectation in the second half. So this means we can just increase the number of new hires, but this is a risk. Of course, we can continue to hire more and more. But if we do that, then, of course, we need to develop these talents after hiring. 3 persons per department would be the right standard per department, I think. As of now, there is a challenge because many people are leaving. And if we try to increase the number of new hires, then next year and the year after, there will be some impact on the development of such talents. Therefore, we would like to maintain the hiring to achieve the target, plus 10% or so. And we'd like to stop people from leaving the top management, so we have to commit to that. I think this is something that we need to commit to right away. Therefore, we'd like to take measures.

Next question. You have kept your full-year forecast unchanged. Is there a lack of transparency or an issue with the second half forecast?

About our full-year forecast, that's not changed. That means things are going as planned, although slightly exceeding our initial plans. That's the reason why we've kept our full-year forecast unchanged. If we are to accelerate our actual results, we're going to make timely disclosures. If we sense deterioration, we're going to disclose potential downward revision. However, to talk about how things are at the moment, I can only communicate the facts and how things are. I am quite positive about the forecast for the second half because, first of all, of the pipeline results or the pipeline numbers, the number of negotiations we have, and also available for matching or the open sell-side mandates. These have been accumulated successfully.  So, about December and March, we think that we have enough pipeline to generate good results. And this is a fact. Besides that, employees' motivation level we feel that this has improved quite a lot. We believe that it's good enough to the level where I can report about this with strong confidence. We used to be at the bottom in 2022 or so, and we have improved step by step.  And finally, we are united as a company. And that's the DNA we used to have as Nihon M&A Center that we are starting to see once again. In September, there was a strong momentum. And all our employees are quite enthusiastic. We didn't have to create this kind of momentum.  In December, we have incentive travel planned based on the results for December. So, I believe that the employee momentum and enthusiasm are going to be strengthened further. I hope to have a peak in December. About the lack of transparency or issue, I do not see that based on what I see in the front lines. 

Next question. M&A sales per transaction are improving substantially. Do you believe you will be able to maintain this high level in Q3 and onwards? Going forward, what is the level you are aiming for? 

Thank you for the question. I, myself, as holdings, it's not that we are aiming for such higher M&A sales per transaction. Rather, we'd like to maintain the M&A sales per transaction. As we increase the number, the M&A sales per transaction decrease. In order to prevent that from happening, we'd like to make the pyramid overall larger, not just the bottom, because if the bottom part increases, only the M&A sales per transaction will decrease.  And this time, the M&A sales per transaction are very good. The JPY 45 million, JPY 50 million, it's not that we are aiming for such numbers. We are aiming for JPY 40 million plus/minus alpha is good enough. That's my idea. In terms of the number, the number multiplied by sales per transaction would be the performance. So, we'd like to maintain this level of M&A sales transactions.  Takeuchi-san, how do you feel as the President of Nihon M&A Center? 

As for mid-cap, looking at the mandates from last year, this is increasing. Overall, mandates, we are selective. We are concentrating on loss-making companies. We are not going to accept mandates. And in terms of sales, we are assuming that so high transaction price mandates are pulling up the overall, and the small amount of M&A sales per transaction is not dragging our feet.  So, we'd like to increase the number of transactions. But rather than increasing the M&A sales per transaction, we'd like to maintain it. We'd like to maintain it at around the JPY 40 million level. And I think this is one of the key points. 

Next question. Can you share with us the number of negotiation open project at the end of September? 

Thank you for the question. We're checking this number. First of all, about the number of mandates, 2,360 an active contract we had in September. In September 2024, compared to September back then, it was 1,960. So, the number increased by 10% or 20%. The number of mandates that are available for matching grew by 120%. So, we believe that there are ample chances for negotiations. The mandates that have come into the pipeline compared to the same time last year is 102% at 420. 

The next question. Looking at new sell-side mandates, it's continuing to decline year-on-year. Both are decreasing directly and network. Are they seeing big decreases? 

Thank you for the question. There are 2 factors, as I mentioned earlier. Takeuchi-san, can you comment?

Thank you for the question. It is continuing to see a decrease year-on-year, both direct and network; they are decreasing at around the same rate. However, I am not that worried about these mandates. We are very selective about this. And that, in the end, will lead to productivity improvement for everything.  For example, loss or excess debt or getting mandates for small companies, then Nihon M&A Center will do value promotion, and the headquarters. And so, many members will be involved in this transaction, and that will decrease the productivity overall.  So, there is an inappropriate buyer. And for the M&A industry, at Nihon M&A Center, we are looking at each of the transactions very much in detail. And if we receive mandates for companies that we cannot sell, that will hinder our productivity and worsen our productivity. And this is a different note compared to the question. 

Then what are we focusing on very much? 

I'd like to talk about this. For the sell-side mandate, close to 50% will be closed. And out of the remaining 50%, 25% will remain. The remaining 25%, we stop the contract. This is a waste. And M&A industry inactive mandates are around 25%. So, we'd like to put more effort into inactive transactions. This is where we are allocating the most resources. We'd like to improve the closing rate, and that will lead to an increase in sales, not just the new mandates.  But then, after KPIs, we should be taking measures for this part. I think this is an inflection point. This is a paradigm shift. Things are changing very much right now. And we need to control to be able to achieve the midterm plan while taking measures here. This is what is required the most for us right now.  When we achieve numbers, we'd like to report to you in the future. Direct and network, looking at the ratio between the 2, last year first half, direct was 34%, referral was 66%. And now it's 38:62. So 35% to 65% is the rough ratio, 35% to 65%, plus/minus 2% to 3%. So direct is increasing just slightly. That is the current situation. 

Next question. Average M&A sales per deal increased. How many large transactions did you close? 

About large deals, the number that we've closed in the second quarter this year was 46 pairs. Q2 last year was 27. So, the number increased by 19 in pairs.

Next question. I'm hearing that the M&A loan screening is becoming stricter at financial institutions. Are there any impacts on the lead time? Are you taking any countermeasures? 

Yes, we are taking measures against this. Interest rate does exist nowadays and financial institutions. But before, there were no interest rates hardly. And therefore, loans for M&As, they could get some interest, and it was very positive, and a quick screening was done before. However, the CapEx loans, financial institutions are able to charge interest. Therefore, for M&A loans, the screening has become stricter, and it is taking a bit longer. And it does impact our lead time.  But with our internal efforts, I do believe it's possible for us to shorten the lead time with a number of financial institutions. We had discussions. And also from financial institutions, we have experienced members who we have invited from financial institutions. And having them as a contact person, we are discussing how to shorten the lead time. There are 2 processes in the screening. One is a collection of documents. The other is screening itself and the collection of documents; it does require some time, like registration or financial results have to be collected, and due diligence results are needed. And these are documents that we have internally. Therefore, it's a loan package. We compile them as a loan package. And financial institutions no longer need to collect documents because we can already submit the documents. So once the interview is done, they can start screening right away. And if we are well prepared, then financial institutions will be able to do the screening quickly.  So screening can be accelerated. As such, we are making efforts to shorten the lead time. This is something we are already taking action on.

We need to apologize that, due to time constraints, the next question is going to be the final one that we're taking up today.  About leading indicators on your presentation material, there's basically only talk about volume, and all of such volume figures are negative year-on-year. And you say that, that's the result of your selective screening. So you do not have a concern there. So I would like to ask how things are in leading indicators based on values, not in volume. According to Tanshin, the intermediary fee is JPY 2.4 billion in the first half. Q2 alone was JPY 1.3 billion, which is up by 19% year-on-year. I believe that this figure is more meaningful as a leading indicator. Is my understanding correct? 

Thank you very much for pointing out a very important theme for us. As we've said, our leading indicators are going down. However, we've said that there are 2 themes behind this. One is that we were fully focused on generating results in the first half. So in the second half, we're going to put a bigger focus on acquiring more mandates, and that's why we don't have much concern about these leading indicators. And we have a very strong capability in acquiring mandates. Therefore, as long as we put enough focus on trying to acquire mandates, we are confident that we can acquire many. And this is based on our track record of 35 years' experience.  Another theme is that we've been selective in acquiring mandates. About being selective, we're going to be even more selective going forward. Therefore, there is going to be a potential decline in the mandate volume. However, we can, at the same time, expect an improvement in quality, and that will eliminate unnecessary processes in our company, which improves our productivity and eventually our overall performance.  Therefore, when it comes to leading indicators, we may need investors to review our leading indicators from a different perspective than before. So we would like to consider what better KPIs we should be presenting, and we are considering exactly that.  About value-based, we're not tracking value-based figures, or rather, we don't have the values that we can readily present to you immediately. However, I basically assume that the values change in line with the volume. Therefore, at the moment, I believe it's safe to assume that, in terms of value as well, we have negative leading indicators, but we're going to recover this.  About interim fees, thank you for pointing this out. This is a positive topic that we've been successfully closing on LOI. So, as a leading indicator, this intermediary fee can be considered to be the topic that will be converted into closure. However, the success rate after closing LOI, I mean, since we've received intermediary fees and retainer fees from the sellers, we have enough information that's with. Therefore, we believe that the successful closure rate is quite high. However, we cannot close all of the mandates we've received through this process. However, the 19% increase in intermediary fee is very positive news, and we will do our best in schedule management to convert this into actual closure. And we're going to perform some checks in line based on the schedule.  Thank you very much for being with us through the end of this session despite your busy schedule. We've talked about the first half results for the current fiscal year. Before we wrap, from Mr. Naraki and Mr. Takeuchi, we're going to give a bit of comment to share with you the ambiance on the front lines. 

So, to talk about the topic that has not been covered today, there is usually a question about the time lag and about the time lag in the second quarter; we had a very limited time lag, one of the smallest in recent years. We now have a more complex deal process compared to before, but our employees are taking the right actions and making the right communications. I believe that this can be considered as positive materials leading to positive results in the future. 

What about Mr. Takeuchi?

So thank you always for your time. As usual, it's the first time in 3 years that we have been able to make an upward revision this time. I am very happy about this. And I feel a bit secure as well. Our employees are very happy about this, and they're very excited, and they are very much encouraged. And based on this happiness, in the third quarter, we'd like to continue to do our best. Q3, Q4, we'd like to accelerate and promote our performance. And I ask for your continued support. Thank you very much.

In the first half, we have been able to come up with an upward revision. And towards December and for the full year, we'd like to leave this good momentum to be able to live up to your expectations. We will continue to do our best. And I ask for your continued support. Thank you very much for your time today.