Nihon M&A Center Holdings Inc.

M&A intermediary services currently do not require specific licenses or permits, but future enactment, amendment, or abolition of laws and regulations may impose certain restrictions on the business. In addition, if amendments or abolition of tax law or the Companies Act related to M&A transactions have a negative impact on the promotion of M&A transactions, this may affect the Group's financial position and operating results, among other things. At present, no specific trend toward stricter regulation has been indicated, but this is recognized as a risk that is the flip side of the expanded business opportunities resulting from the diversification of legal frameworks.

The Group is obligated to maintain confidentiality of clients' confidential information under non-disclosure agreements and other arrangements, and continues to strengthen both its systems and operations, including obtaining ISO27001 certification. However, if confidential information is leaked externally for any reason attributable to the Group, this could lead to a loss of trust and have a material impact on the Group's financial position and operating results, among other things. Given the nature of the M&A intermediary business, the confidentiality of the information handled is extremely high, and information security is positioned as a top-priority issue.

In the course of conducting business, the Group may be subject to litigation or other legal proceedings for various reasons, regardless of whether any laws or regulations have been violated. Depending on the filing of a lawsuit and its outcome, social credibility may be affected, which could impact the Group's financial position and operating results, among other things. The Group strives to establish a compliance framework, but recognizes that complete elimination of this risk is difficult.

The Group positions an emphasis on compliance as an important management issue and continues to enhance and strengthen its internal control systems; however, should misconduct or illegal acts by officers or employees occur, this could affect the Group's financial position and operating results, among other things. Although the Group makes every effort to prevent misconduct in the execution of business operations, this is explicitly recognized as a human-related risk.

The Group's revenue is heavily dependent on the M&A intermediary business for domestic small and medium-sized enterprises, and if this market were to contract in the future, this could affect the Group's financial position and operating results, among other things. While the market is currently expected to expand steadily against the backdrop of the declining birthrate, aging population, and succession issues, and a short-term trend reversal is considered unlikely, this is recognized as a medium- to long-term risk. Because business diversification is limited, the high degree of dependence on a specific market constitutes a structural risk factor.

The M&A intermediary business is fundamentally a success fee-based business model, structured such that prolonged deal completion timelines or a decline in the deal closing rate directly lead to a decrease in revenue. Because deal progress and closing depend on external factors and the intentions of the parties involved, there is an aspect of low stability and predictability in revenue. If the deal closing rate declines in the future, this could affect the Group's financial position and operating results, among other things.

The M&A intermediary business does not require licenses or permits, resulting in low barriers to entry, and there is a risk that increased competition from other companies could lead to bidding conflicts on many deals, causing engagement fees to decline. The Group secures a competitive advantage through its nationwide information network and industry-specific know-how, but if these advantages are replicated by competitors or if price competition intensifies, this could affect the Group's financial position and operating results, among other things. On the other hand, an increase in new entrants is also seen as expanding the overall market base, and this is not necessarily viewed solely as a negative impact.