# A Company Earning 30% Margins Chose to Leave the Stock Market: Nakano on His MBO (Investor's Sunday)

Source: Realpha Blog (blog.getrealpha.com)
Original article and charts: https://blog.getrealpha.com/en/blog/invsunday-2026-10-11-mbo/

> The October 11, 2026 episode of Investor's Sunday, part two: Ihara Science chairman Tokuo Nakano on the 2023 MBO — why a profitable company went private, how a ¥30bn loan got approved, and the problem that got harder after the shareholders left. Listener notes for education only; not investment advice.

Published: 2026-10-11
Locale: en
Tags: MBO, corporate governance, Japan equities, going private, company culture


![A precision metal-parts factory aisle at dusk, machines receding into depth, an elderly executive standing mid-aisle under light from high windows](/covers/invsunday-2026-10-11-mbo-cover.png)

> Quiet and sparing of speech, he had no desire for glory or gain… Letting go of gain and loss, he lived out his days this way.
>
> —— Tao Yuanming, "Biography of Mr. Five Willows" (Eastern Jin, c. 5th century; translated by the author)

In the October 11, 2026 episode of *Investor's Sunday* (part two), Tokuo Nakano, chairman of Japan's Ihara Science, walked through the MBO he led in 2023 — the management buyout that took his company off the stock exchange. He set the offer price against the company's all-time high share price of ¥2,980, which meant roughly ¥30bn to buy in every share, against annual revenue of a little over ¥20bn at the time; he borrowed the whole sum from his lead bank. Dalton Investments, the US fund that had built a stake above 5% and later voted in favour, said on the show that what drew them in was an operating margin above 20%. This is a profitable company choosing to leave the market — and the whole structure only holds because the cash flow could service the loan.

## Why would a company making money want off the exchange?

Nakano's answer is blunt: the share price can't measure what he's trying to do.

He broke it into three layers. First, the status of being listed has worn away — being a listed company, first section or second, used to be a company's ID card; now listing is easy and listed companies go under, so the badge is worth little. Second, the sentence he has refused since becoming president in 1999: that a company belongs to its shareholders. His own formulation is that the company belongs to its employees — of the employees, by the employees, for the employees. He recalls a shareholder at the AGM pressing him, "Surely the company belongs to shareholders," and answering, "I don't think so." Told that thinking like that was why he was incompetent, he replied that he didn't feel he'd done anything wrong, which made things worse.

The third layer is the one that made me stop. He says society has collapsed its judgement of companies down to the share price, and the share price is a popularity vote rather than a measure of capability; to make it look good, a manager has to act, and the people actually working on the shop floor feel nothing from that performance. He asked himself whether he could keep running a company that way.

![Two vertical rulers stand side by side: measuring “what he wants to do” against the stock-price ruler leaves it outside the scale with a cross, while the operating-margin ruler gives it a clear position.](/figures/mbo-two-rulers-en.svg)

So the line the host remembered — "shareholders, I don't care anymore" — sits on top of twenty-odd years of thinking. He didn't work it out the day Dalton showed up. He had worked it out and couldn't pull the trigger; his words were that the resolve never came until he met Dalton.

## How does a fund holding over 5% end up on the manager's side?

Dalton's representative laid out their sequence: numbers first, person second. In the years before they invested, Ihara Science had revenue around ¥22bn with an operating margin above 20%, and their reaction was "why does a company like this exist." They met Nakano, concluded the margin came out of a company culture, and bought past the 5% disclosure threshold.

Nakano's reaction ran the other way. His words: "someone formidable has arrived," and "they've finally come for Ihara too." This was around the peak of shareholder-primacy talk in Japan; he had heard too many stories about foreign funds, and his first thought was being taken over and sold off. The conversation itself was mild and uneventful, yet, as he put it, his assumptions got there first.

![On a horizontal progress bar, the gray tendered-share total stops short of the two-thirds threshold, and only the addition of Dalton’s blue 10% block carries it across.](/figures/mbo-two-thirds-en.svg)

The interesting part is who proposed going private: Dalton did. Their reasoning — listing costs money and shareholder relations cost time, while this company's margin came out of its employees' sweat, and the dividends shareholders wanted came out of the same earnings, so the shares might as well sit with the employees and with Nakano himself. Nakano's memory of that pitch: "I remember it, but I couldn't hear it back then."

What I keep coming back to is that what flipped this holding from adversary to ally was how clearly Nakano could say where he was taking the company. Dalton's view was that without a vision from the top, employees lose direction; after hearing him out they decided to hold for the long run. Later, during the tender offer, another fund objected that the price was too low and the shares tendered kept falling short — Dalton put its roughly 10% behind the deal, pushing past the two-thirds legal threshold, and the market shifted to expecting the deal to close.

## A company with ¥20bn of revenue borrowing ¥30bn — what made the bank say yes?

Nakano handed the problem straight to the bank. He called in his lead bank and said: here's what I'm doing, lend me ¥30bn, the answer is Yes or No. They asked for time to think; he set a deadline of February 7 and added that it was the last day. They said yes that day.

The condition: whatever the bank says, he does. His words were that if they lent it, he'd do as told, 100% to the bank's instructions. The bank wrote the terms accordingly — a long list of things he couldn't do for two years. He later learned the bank's pitch about having done plenty of MBOs wasn't so: this deal had them working through the night with head office, settled on the final day, on the bank's terms. A senior banker told him afterwards that they'd never sleep with their feet pointed toward Ihara — the deal taught them the business.

Dalton's representative added the key point: this was not an ordinary ¥20bn company. On revenue of ¥20–25bn, operating profit ran around ¥4bn with cash flow near ¥5bn once depreciation is added back, so the loan was sized against profit rather than revenue. He noted that ¥50bn of revenue with ¥5bn of profit borrowing ¥30bn happens; ¥20bn of revenue with ¥5bn of profit borrowing ¥30bn is rare in recent years.

Which means the margin is what carries the money. My takeaway: the MBO option doesn't exist for most companies — the bank can't make the arithmetic work.

## Once the shareholders are gone, is life actually freer?

Nakano described both sides, and the second side is where this episode earns its keep.

The speed is real. He says that before, lawyers had to be consulted and shareholder meetings convened, and things he wanted to do couldn't be done; now he is the only shareholder, so a meeting can be held whenever and the decision made on the spot. Faster decisions are the thing he says he's happiest about. Three years after going private, the operating margin went from the low twenties to 30%, this year's revenue is around ¥30bn with profit near ¥9bn, and he talks about ¥50bn in three years and ¥100bn in eight. When he became president, revenue was ¥5bn and the company lost money.

Then he says that getting free of shareholders turned the firm into a bank-managed company. He gave himself two years to get out from under bank control, and to get out, another ¥5–6bn of profit along the existing trajectory wouldn't cut it — he needed a 30% margin. That is where the 30% target came from. In his words, it saved him.

![Two panels are compared: on the left, the company is surrounded by a ring of shareholder circles; on the right, they are replaced by a thick bank frame labeled with restrictions for two years.](/figures/mbo-swapped-constraint-en.svg)

The harder part is that nobody argues with him now. He says having people talk back is the easier arrangement — when someone shouts at you, you at least learn where you stand. Now there's no one outside and fewer inside: he runs an "everyone is a manager" policy where anyone can take a shot at the president or chairman, and outsiders who join are surprised a company lets people speak to the top like that, yet the people who genuinely scrutinise the final management call have disappeared both inside and out. That, he says, forces more care.

So he built himself a procedure: every decision gets labelled a hypothesis. Do it, test whether it turned out as expected, and change it when it didn't. On air he said people are never perfect and will certainly be wrong, and that has to be the starting assumption. Listening to it, I thought: he has hand-built the function of an outside shareholder inside his own head.

## Which companies should consider this, and what can I use from it?

Nakano's filter is coarser than I expected: half of all listed companies should go private. More precisely, a company large enough to need continuous large-scale outside capital gets value from listing; a company without that profile sitting on the exchange should leave. The host filled in the picture — listed for twenty-odd years, market cap still under ¥100bn, revenue barely moved.

Then came a line with no padding on it: if the margin won't come, the company isn't contributing much to the world and isn't doing anything valuable; a share price that won't rise means poor popularity and little recognition, and that should be admitted plainly. Dalton's representative supplied the other side — with outside pressure gone, diversity of thought shrinks, a ¥10bn investment decision has no one to stop it, and outside directors brake weakly, so the only thing left is the manager's own caution.

Turning this back on myself, two angles hold up.

The first is telling apart what a given number is measuring. The share price measures popularity; the operating margin measures whether this company solves something for customers that nobody else solves. Nakano's metaphor for culture: visible things grow out of invisible ones — the fruit is visible, what the roots absorb is not, and to grow the fruit you work on the side you can't see. Companies that blow up still have their numbers, he says; what's missing is anyone who wants to act, so there are numbers and no one to do the work. When I look at a company, the visible column is the easy one to check. The other column has always been the hard part.

The second is the scope of "announce first, figure it out after." He says people barely use the intelligence they have and only think once cornered, so his method is to declare a 30% margin company out loud; having said it, he has to think, and having thought, it got built. Pressed on why other companies set lofty targets and miss them, he answered: thought — the culture is the source of every result. I won't copy this wholesale, because it works only when enough people inside can catch the sentence when it's thrown; he says himself that after writing a 270-page in-house text and teaching it for years, maybe half the company carries it.

## Worth a look

- *Investor's Sunday*, October 11, 2026, with Tokuo Nakano, chairman of Ihara Science (part two), hosted by Nishida and Morimoto; broadcast on InterFM, archived on the major audio platforms.
- For background, Japan's METI guidelines on fair M&A and the related public documents on takeover conduct lay out the legal context for MBOs in Japan and the minority-shareholder protection arguments.
- At the end of the episode Nakano mentions that since last year he has sponsored Kameya, an inn in Izunokuni, Shizuoka, saying the medium for moving a customer — pipe fittings or an inn — is a difference of form. It has nothing to do with the MBO, and it's the least packaged demonstration of his thinking in the hour.

## One Thing to Take With You

One idea: whatever measures you, shapes how you work. What Nakano couldn't stand wasn't the shareholder as a person — it was the share price as a ruler. It measures popularity, and the thing he wanted to build doesn't register on it, so he swapped the ruler out. Most of us can't swap ours (KPIs, performance reviews, what colleagues think, likes), but we can at least know which ruler is on us, and which part of us it can't reach.

A practice I've tried myself: take a sheet of paper. On the left, write the top three metrics on the ruler other people use on you (at work, maybe a sales number; at home, maybe how much you earn and what time you get back). On the right, write the three things you honestly think you do well. Then see how many lines up. Leave the matches alone; for the mismatches, pick one and write down a specific block of time you'll give it this month — the date, the hour, how long.

![Two columns contain three boxes each: the left lists the metrics others use to judge me, and the right lists what I believe I do well; dashed lines compare them, and each mismatch leads to an action requiring a specific time.](/figures/mbo-ruler-exercise-en.svg)