Hidekazu Yokoyama has spent three decades building a thriving logistics business on Japan\u2019s snowy northern island of Hokkaido, an area that provides much of the country\u2019s milk.<\/p>\n
Last year, he decided to give it all away.<\/p>\n
It was a radical solution for a problem that has become increasingly common in Japan, the world\u2019s grayest society. As the country\u2019s birthrate has plummeted and its population has grown older, the average age of business owners has risen to around 62. Nearly 60 percent of the country\u2019s businesses report that they have no plan for what comes next.<\/p>\n
While Mr. Yokoyama, 73, felt too old to carry on much longer, quitting wasn\u2019t an option: Too many farmers had come to depend on his company. \u201cI definitely couldn\u2019t abandon the business,\u201d he said. But his children weren\u2019t interested in running it. Neither were his employees. And few potential owners wanted to move to the remote, frozen north.<\/p>\n
So he placed a notice<\/a> with a service that helps small-business owners in far-flung locales find someone to take over. The advertised sale price: zero yen.<\/p>\n Mr. Yokoyama\u2019s struggle symbolizes one of the most potentially devastating economic impacts of Japan\u2019s aging society. It is inevitable that many small and medium-size companies will go out of business as the population shrinks, but policymakers fear that the country could be hit by a surge in closures as aging owners retire en masse.<\/p>\n In an apocalyptic 2019 presentation<\/a>, Japan\u2019s trade ministry projected that by 2025, around 630,000 profitable businesses could close up shop, costing the economy $165 billion and as many as 6.5 million jobs.<\/p>\n Economic growth is already anemic, and the Japanese authorities have sprung into action in hopes of averting a catastrophe. Government offices have embarked on public relations campaigns to educate aging owners about options for continuing their businesses beyond their retirements and have set up service centers to help them find buyers. To sweeten the pot, the authorities have introduced large subsidies and tax breaks for new owners.<\/p>\n Still, the challenges remain formidable. One of the biggest obstacles to finding a successor has been tradition, said Tsuneo Watanabe, a director of Nihon M&A Center, a company that specializes in finding buyers for valuable small and medium-size enterprises. The company, founded in 1991, has become enormously lucrative, recording $359 million in revenue in 2021.<\/p>\n But building that business has been a long process. In years past, small-business owners, particularly those who ran the country\u2019s many decades- or even centuries-old companies<\/a>, assumed that their children or a trusted employee would take over. They had no interest in selling their life\u2019s work to a stranger, much less a competitor.<\/p>\n Mergers and acquisitions \u201cweren\u2019t well regarded,\u201d Mr. Watanabe said. \u201cA lot of people felt that it was better to shut the company down than sell it.\u201d Perceptions of the industry have improved over the years, but there are \u201cstill many businesspeople who aren\u2019t even aware that M.&A. is an option,\u201d he added.<\/p>\n While the market has found buyers for the businesses most ripe for the picking, it can seem nearly impossible for many small but economically vital companies to find someone to take over.<\/p>\n In 2021, government help centers and the top five merger-and-acquisitions services found buyers for only 2,413 businesses, according to Japan\u2019s trade ministry. Another 44,000 were abandoned. Over 55 percent of those were still profitable when they closed.<\/p>\n Many of those businesses were in small towns and cities, where the succession problem is a potentially existential threat. The collapse of a business, whether a major local employer or a village\u2019s only grocery store, can make it even harder for those places to survive the constant attrition of aging populations and urban flight that is hollowing out the countryside.<\/p>\n