Nihon M&A Center Q1 FY2027: Net profit surges 33.8% on fund gains; op profit slips

Nihon M&A Center (Nihon M&A Center Holdings) reported consolidated results for Q1 FY2027 (April-June 2026) on July 30, 2026. Revenue edged up 0.9% year on year to ¥9,104 million, but operating profit fell 6.4% to ¥2,349 million, marking a decline in core earnings. However, a ¥787 million gain on the sale of a fund investment, booked as special income, pushed quarterly profit before income taxes to ¥3,156 million and net profit attributable to owners of the parent to ¥2,027 million (up 33.8%). The fund sale gain significantly lifted net profit, masking the underlying operating profit dip.

Under its medium-term vision, dubbed its "second founding," the company concentrated resources on improving the quality of mandates. New mandates rose 20.1% to 347, while the number of deals closed fell 11.3% to 188. However, a shift toward larger transactions lifted average M&A revenue per closed deal by 13.4% to ¥46.3 million. Ordinary profit declined 11.1% to ¥2,252 million, pressured by a 9.5% increase in SG&A expenses to ¥3,144 million, partly due to higher IT-related costs.

Starting this fiscal year, Nihon M&A Center reorganized its reporting from a single segment into two: M&A Consulting Business and Fund Business. The M&A Consulting Business posted revenue of ¥9,136 million (including ¥9,059 million from external customers and ¥77 million in internal sales) and segment profit of ¥2,540 million, down from ¥2,727 million a year earlier. While the number of closed deals declined, the segment secured 19 large deals for mid-cap companies (up 35.7%), maintaining a solid segment profit margin of 27.8%.

The Fund Business generated revenue of just ¥44 million but segment profit of ¥651 million. This high margin reflects a ¥848 million gain on the sale of a fund investment through J-Capital, an intermediate holding company established in April 2026. The gain was recorded as special income, significantly boosting overall bottom-line profit.

Adjusted for eliminations (revenue: –¥77 million, profit: –¥35 million), consolidated revenue totaled ¥9,104 million and pre-tax profit ¥3,156 million.

Total assets at quarter-end stood at ¥54,442 million, down ¥11,780 million (17.8%) from the prior fiscal year-end, largely due to a ¥7,520 million decrease in cash and deposits and a reduction in current liabilities from tax payments. The equity ratio edged slightly lower from 75.8%, with net assets down 5.7% to ¥47,732 million. Retained earnings declined after accounting for net profit and dividend payments.

The full-year dividend forecast for FY2027 is unchanged at ¥29 per share (ordinary dividend ¥25 + special dividend ¥4), with an interim dividend of ¥14 and a year-end dividend of ¥15. No share buyback was announced, but treasury stock of ¥18,808 million (approximately 19.61 million shares) provides flexibility for future capital policy. Although cash flow statements were not disclosed, cash and deposits of ¥32,927 million remain ample, supporting potential M&A investments and growth infrastructure.

The quarterly filing did not specify risk factors, but several points emerged from the strategy discussion:

• The shift toward deal quality over quantity may weigh on short-term earnings.
• Rising IT spending linked to data-driven management is pressuring margins (SG&A ratio 34.5%, up from 32.3% a year ago).
• Overseas operations and joint ventures with regional financial institutions are exposed to economic and regulatory changes.
• Foreign exchange risk (a ¥26 million forex loss was booked this quarter).

Achieving the medium-term target of ¥30 billion in ordinary profit will require balancing high-value-added deals with cost control.

Nihon M&A Center left its full-year earnings forecast unchanged from the April 30, 2026 announcement. For FY2027, it projects revenue of ¥52,800 million (up 5.1%), operating profit of ¥19,300 million (up 2.9%), and net profit attributable to owners of the parent of ¥13,400 million (up 7.3%). The cumulative first-half forecast calls for revenue of ¥23,900 million (up 5.8%) and operating profit of ¥8,600 million (up 2.4%), implying a recovery from the first-quarter operating profit decline. While no revision was made, the focus remains on how the core M&A brokerage business will grow revenue amid a decline in closed deals.

The quarter’s biggest development is the establishment of the Fund Business as a separate segment and a basic agreement on a business alliance with U.S.-based Generational Group. Profit contribution from the Fund Business’s investment sales has materialized, raising expectations that it could become the company’s "second pillar."

The company is also deploying an AI-powered deal analysis service called "Bring Out" to build a database aimed at improving deal-matching precision and success rates. The expansion of management consultation offices nationwide and joint ventures with regional banks are part of a strategy to capture succession-related demand from local businesses. Whether these initiatives will drive the medium-term plan will become clearer in the coming quarters.