GENDA Inc.: Spearheading the Ultimate Entertainment Ecosystem

In Japan’s dynamic arcade scene, the anime craze, propelled by streaming services, has cultivated a desire for real-world ties to beloved characters, exemplified by the escalating demand for plush figures – bridging the gap between the digital and physical world.

Amid this shift, GENDA emerges as an Asian M&A powerhouse, orchestrating a symphony of acquisitions that spans various entertainment areas, notably the thriving amusement arcade sector. With a focus on claw crane and prize games featuring cutting-edge anime, GENDA, driven by a robust M&A strategy, aims to infuse more joy into people’s lives under the banner of ‘More fun for your days.’

Since its public listing in July 2023, GENDA has become a serial acquirer, making 15 announced deals in just six months and 26 since its inception in 2018. It envisions creating an entertainment ecosystem through strategic M&A, allowing each group company to benefit from excess cash and grow through investment opportunities with equitable returns. The primary focus is achieving optimal capital efficiency by leveraging M&A returns and minimizing cash expenditures, providing enhanced shareholder value.

Mai Shin, Representative Director and President at GENDA Inc., states, “Our growth should be continuous transformational growth through M&A in the entertainment industry. We acquire numerous entertainment companies and aim to eventually become the world’s number one entertainment company.”

The company’s roadmap to success revolves around creating a global entertainment ecosystem marked by a unique platform and an extensive network connecting content and fans worldwide. It strategically expands entertainment platform business and ventures into content, envisioning a cohesive group-wide entertainment ecosystem catering to diverse consumer preferences.

GENDA’s acquisition of SEGA Entertainment during COVID, showcased its operational prowess. Under GENDA’s leadership, the company underwent a remarkable transformation, rebounding from significant losses of 3.2 billion to attain a historic peak in operating income, reaching 3.8 billion.

In the roll-up M&A in the amusement arcade industry, GENDA led various acquisitions, including stock acquisition, business transfer, absorption-type merger, and fixed asset acquisition. In each instance, there was a significant increase in PMI, showcasing its ability to effectively optimize operations. Measures taken include increasing the ratio of prize games, rolling out GiGO-exclusive prizes, changing the store layout, improving operational efficiency through DX, and reducing costs through bulk purchasing of game machines and prizes.

GENDA’s effectiveness hinges on its dual strategy in approaching acquisitions. Firstly, sourcing involves a deep familiarity with the acquired companies, facilitated by an inner circle sourcing capacity utilizing a professional team adept at managing and optimizing this process. Secondly, the valuation strategy centered on acquiring companies at low valuations, with an emphasis on entry valuation as a critical factor in M&A.

GENDA’s financing strategy underscores its dedication to providing returns to equity holders, emphasizing a reduced reliance on cash contributions from equity holders by securing financing from commercial banks. The investment committee, comprised of individuals collectively holding more than 25 percent of the total shareholding, underscores GENDA’s commitment against any EPS dilution or overall dilution concerns, surpassing conventional perspectives on equity financing dilution in M&A.

Underpinning GENDA’s success is its three-pronged professional approach - a core management team comprising industry veterans, a layer of M&A talents from top-tier financial institutions, and a rare tech team in the entertainment sector – all responsible for M&A sourcing, execution, financing and PMI.

Recognizing the finite lifecycle of every form of entertainment, GENDA emphasizes diversification as a fundamental strategy for long-term success. The company challenges the traditional approach of Japanese entertainment companies, which hoard cash, by emphasizing the importance of M&A for optimal capital deployment.

Looking ahead, GENDA is poised for continuous transformational growth, with sales and EBITA expected to experience a significant leap in the next fiscal year.

In the grand scheme of the entertainment sector’s ever-evolving nature, GENDA stands as a beacon of strategic, forward-thinking prowess, steering the course toward global dominance.