You Have an M&A Broker. Do You Still Need a Lawyer on the Buyer's Side?

Most small acquisitions in Japan are found through an intermediary — an M&A brokerage, or one of the online marketplaces. That is how the market works here, and for a first-time buyer it is a reasonable way in.

It also produces a reasonable question: if the intermediary manages the process and supplies the contract, why pay a lawyer as well?

The answer is that an intermediary and a buyer-side lawyer are not doing the same job.

In the Japanese model, one intermediary frequently sits between the seller and the buyer and is paid for getting the transaction done. That is a coordinating role, not an advocate's role. Japan's SME Agency says so directly: its guidelines on small and medium-sized M&A identify the conflict-of-interest risk inherent in acting for both sides, and ask intermediaries not to determine the outcome of steps such as valuation and due diligence — where one party's position can easily colour the result — and to tell the parties to seek professional advice where needed.

This is not an argument that intermediaries are the problem. It is an observation about who each person is acting for.

What the intermediary does

An M&A intermediary generally handles:

• matching sellers and buyers
• coordinating the commercial terms
• managing the process and the timetable
• organising the exchange of documents
• steering the parties from heads of terms to a definitive agreement

For someone buying a company for the first time, having one party managing the seller contact, the scheduling and the document requests is worth a great deal.

"Intermediary" and "adviser" are different things

Japanese M&A support comes in two shapes: the intermediary (仲介), who sits between the parties, and the financial adviser (FA), who acts for one side.

The reason the SME Agency raises conflicts in relation to intermediaries is structural rather than moral: on price alone, the seller wants more and the buyer wants less. No one can maximise both.

The guidelines do not treat the intermediary model as illegitimate. What they ask is that the parties understand which capacity the person in front of them is acting in. That is the buyer's question to ask, and it is a fair one.

What a buyer-side lawyer does

A buyer-side lawyer is instructed by the buyer and assesses everything from the buyer's legal position:

• legal due diligence
• framing the further questions and document requests to the seller
• the legal aspects of the acquisition structure
• reviewing the share purchase or business transfer agreement
• representations, indemnities and conditions to closing
• reflecting due diligence findings in the contract
• advice on legal points that arise in negotiation

"The intermediary provides the contract" is not an answer

Intermediaries commonly supply a share transfer agreement template.

There is nothing wrong with a template. But what matters to a buyer is not whether the document contains the standard clauses. It is whether the problems found in this deal are addressed in it.

A template will have a general warranty about undisclosed liabilities. It will not know that due diligence identified a specific unpaid-overtime exposure. It will not make the key customer's consent a condition to closing, because it does not know that the key customer's consent is required.

A properly formed contract and a contract that handles your risks are different achievements. The clause-by-clause view is in the eight clauses buyers should check.

The two roles side by side

When independent buyer-side advice earns its fee

This is your first acquisition

Without experience of the terminology and the process, it is hard to tell which features of a deal are ordinary and which are specific to this one.

You are buying the whole company by share transfer

The company's history stays inside the company, which makes off-balance-sheet and contingent liabilities the central question. The checklist is in the ten things to check.

The business is IT, web or SaaS

Where the value sits in source code, intellectual property, customer data and third-party service agreements, who owns what and on what terms is the value.

The business depends on the outgoing owner

If the seller personally holds the customer relationships and the know-how, how the handover, the non-compete and the transition period are structured decides whether you have bought a business or a list.

Due diligence has found something specific

Once a concrete problem exists, converting it into price, conditions, warranties or indemnities is a contract question. That process is set out in turning due diligence findings into deal terms.

You do not have to instruct for the whole deal

Full support from first contact to closing is one option, not the only one.

Narrower instructions are perfectly workable:

• have the target's documents reviewed
• have only the purchase agreement reviewed
• have due diligence done on specific areas of concern
• get a second opinion on the terms the intermediary has proposed

On a small deal, matching the professional spend to the transaction and spending it where the risk is concentrated is often the more rational approach.

When to ask

The useful moment is around the start of due diligence, not after the definitive agreement is drafted.

At that point it is still possible to think about:

• what further material to ask the seller for
• where to concentrate the review
• how any finding will be reflected in the price and the agreement

as one connected exercise. By the time you first raise it a week before signing, the price and the main terms are settled in practice and the room to change them is narrow.

In short

An M&A intermediary and a buyer-side lawyer are not competitors. They are different functions.

The intermediary moves the transaction forward, which is genuinely valuable. The buyer-side lawyer looks at the same transaction from your side only, and carries what that produces into the due diligence and the contract.

For an individual making a first acquisition in Japan, the realistic pattern is not to hand the whole deal to a lawyer. It is to take independent advice on the legal due diligence and the purchase agreement, and to leave the rest of the process where it already works.

Primary sources

• SME Agency, Guidelines for Small and Medium-sized M&A (3rd edition) (Japanese)
• SME Agency, review of the Guidelines, including explanation of important matters before contracting (Japanese)
• SME Agency, M&A support agency registration system (Japanese)