In recent years, Japan has been facing an unprecedented demographic crisis, marked by a drastic decline in birth rates and a rapidly aging population. In 2023, the number of newborns fell by 5.1% compared to the previous year, reaching a historic low of 758,631 births. This demographic decline led to a population reduction of nearly 832,000 people, the most significant drop ever recorded (source: ANSA).

This situation is placing immense pressure on small and medium-sized enterprises (SMEs), which form the backbone of Japan’s economy. Many business owners, often elderly, are struggling to find successors to take over their businesses, leading to the closure of numerous companies. A 2023 government report highlighted that without generational turnover, Japan risks losing a third of its SMEs in the coming years (source: AVVENIRE).

The role of  mergers and acquisitions (M&A)

In response to these challenges, mergers and acquisitions (M&A) are emerging as a strategic solution to ensure the continuity and growth of Japanese SMEs. In 2023, the value of M&A transactions in Japan increased by 23% compared to the previous year, reaching approximately $123 billion. This growth has been driven by regulatory pressure, investor demand to enhance corporate valuations, and the need for consolidation in an increasingly competitive market (source: BAIN).

M&A provides SMEs with opportunities to access new technologies, markets, and expertise, facilitating innovation and improving operational efficiency.

Parallels with Italy

Italy is also facing a significant demographic crisis, with one of the lowest birth rates in Europe. This negative demographic trend presents challenges similar to those in Japan, particularly for SMEs, which play a crucial role in the Italian economy.

In recent years, M&A activity among Italian SMEs has increased, aiming to enhance competitiveness and promote business growth. According to an analysis by Il Sole 24 Ore, fostering the growth of SME groups in Italy is essential for ensuring global competitiveness. Managerial and financial expertise, business model restructuring, and strategic M&A utilization are key elements for success (source: IL SOLE 24 ORE).

Conclusion

The demographic crises in Japan and Italy highlight the importance of mergers and acquisitions as a tool to ensure the sustainability and growth of SMEs. Through targeted M&A strategies, companies can overcome challenges related to demographic decline, access new market opportunities, and strengthen their competitive position in an evolving global economy.