The succession crisis bedeviling smaller Japanese companies has become a growth engine for Next Generation Technology Group, turning it into the country¡¯s best-performing initial public offering last year.

The startup focuses on buying manufacturing firms without a clear succession plan. Shares of the company have risen 202% since their listing last February, beating the likes of artificial-intelligence driven JX Advanced Metals.

NGT went public in an IPO which valued it at ?17 billion ($111 million) and that valuation has now grown to ?90 billion after it acquired companies with niche technologies along the way. Its acquisitions include construction warning signs maker Tiock, fork lift seller Advance and optical films equipment maker Shinohara Manufacturing.

¡°The business model fits well with Japan¡¯s structural issues,¡± said Ikuo Mitsui, fund manager at Aizawa Securities.

Japan has about 2.45 million small-business owners, about half of whom have yet to identify a successor, according to the Small and Medium Enterprise Agency, part of the nation¡¯s economic ministry.

Manufacturers in Japan may grapple with disruptions caused by shortages of components or services, and NGT¡¯s efforts to protect the broader supply-chain by supporting succession are valuable, the money manager added.

The business involves buying and adding value to the firms, rather than selling them. After the acquisition, NGT offers support in areas like hiring, and facilitates business between portfolio companies to generate synergies.

¡°Going public worked better for acquisition activities as that also makes hiring at the portfolio companies easier,¡± said NGT¡¯s president Eiichi Arai who previously worked at Innovation Network of Japan, a government-backed public-private investment firm. While valuation matters, the increase in taking-private deals bodes well for the company, he said, adding that the company continues to mull opportunities in tender offers and carve-out deals for listed firms.

Japan¡¯s merger and acquisitions boom saw ?36 trillion in announced deals last year, the largest since 2006, data compiled by Bloomberg shows. Those include billion-dollar privatization offers for Toyota Industries and NTT Data Group.

A sustained flow of acquisitions is critical to its business, says Aizawa¡¯s Mitsui, while adding transparency and consistency of business practices are also important.

NGT¡¯s Arai said the company has created templates for its acquisition screening process and adding value. The firm¡¯s strategy is quite simple, he added.

¡°There¡¯s no magic wand ... we only have to pile up deals constantly.¡±