Just as Important as Who the CEO Is: How the Company Runs Without the CEO

Summary: M&A involving small and mid-sized companies usually centers on the owner. A highly capable CEO is a strength for the company, but after an acquisition that same strength can be read as a risk factor. This is because the existing CEO often leaves the company after a certain period following the M&A. So when looking at a company, one should consider not only “who the CEO is” but also “how this company can operate without the CEO.”

CEO Influence Differs by Industry

• Fashion and entertainment: Because a “feel” for trends and public taste is important, the brand identity itself is often based on the CEO’s philosophy and disposition.
• Professional services such as advisory, legal, accounting, and finance, and the investment business: The CEO’s expertise, reputation, and network translate directly into performance, so buyers view the CEO’s departure as a major risk.
• Large-scale retail and franchises: These run on operating manuals and standardized processes, so the shock is relatively small even when the leader changes.
• Technology-focused manufacturing: The capabilities of the technical staff and production organization can matter more than the CEO’s management capabilities.

Even within the same financial sector, at financial companies above a certain size, internal control systems mean that a change of CEO does not immediately affect stability, but the story is different for a founder-centered investment firm.

This Difference Is Reflected in Price

Key money for small business owners (the payment received for operating know-how, regular customers, etc. when handing over a store) is typically around 0.5x to 2x annual profit, whereas enterprise value in the M&A market is often formed at around 5x to 10x profit. This gap reflects overlapping factors such as risk, scale, and the reliability of financial information, and CEO dependence is one of them. The fact that deals by aggregators, which buy up multiple small brands, generally stay at around 3x to 5x profit also appears to reflect high CEO dependence, along with the difficulty of verifying performance and non-standardized financial structures.

The numbers themselves can also differ. If the CEO’s labor costs or the costs of family staff are not properly reflected in the books, nominal profit can appear larger than it actually is. If the CEO single-handedly took care of sales, purchasing, HR, and finances, the buyer is likely to assume that post-acquisition profit will decline by the cost of the people who will take over those tasks.

Buyers Either Lower the Price or Tie It to the Structure

The more CEO-centered the business, the more buyers scrutinize the succession plan and whether the organization can operate independently, and they include terms in the contract that require the CEO to remain in management for a certain period. Retention and employment guarantees (terms promising compensation and employment so that key personnel remain for a certain period), non-compete clauses, earn-outs that tie part of the consideration to performance, and roll-overs in which the seller reinvests part of their stake are also used in the same context. From the seller’s perspective, the higher the CEO dependence, the larger the conditional portion of the amount received, and the later the point at which they can leave the company may be.

The same applies after the acquisition. Key personnel often leave when uncertainty grows after an M&A, and in an organization whose people worked because of one CEO, that turbulence can be greater.

It Matters Even More for a Succession-Driven Sale

In Dec 2025, the Ministry of SMEs and Startups estimated that SMEs whose managers are aged 60 or older account for one-third of all SMEs, and that 28.6% of these have no successor. If a company where succession to children is difficult considers third-party succession through M&A, the very purpose of the sale lies in the CEO leaving the company. In 2026, there was also the Carlyle–Chungho Nais deal, in which the heirs sold the company to a private equity fund after the founder’s death. (View deal record)

Such systems are difficult to build in a short period. It takes time to hand over the customer relationships held by the CEO so that they are managed jointly with sales staff, to document the criteria for major decisions, and to ensure that technology and transaction information accumulate in the company’s systems rather than with individuals. The impact is correspondingly large. Even a business that stayed at the key-money level may be able to command multiples of 5–10x or more in the M&A market if it grows beyond a certain scale through systematic operations, accumulation of brand equity, and digitalization and automation.

We believe that building a management system is not about reducing the owner’s role, but about keeping the value the owner created within the company.

Frequently Asked Questions

Is it difficult to sell if CEO dependence is high?

Rather than being difficult, it often means a lower price or larger conditional consideration such as retention terms and earn-outs.

What should be prepared first before a sale?

It is best to start by building systems that can show the company can operate without the CEO, such as joint management of customer relationships, documentation of decision-making criteria, and systematization of technology and transaction information.