What Rakuten Group’s Financial Restructuring Reveals
Rakuten Group’s financial business restructuring is entering its final phase. News reports indicate that Mizuho Financial Group is moving to acquire additional shares in Rakuten Card, making it an equity-method affiliate. Furthermore, a potential merger between Rakuten Card and UC Card is reportedly under consideration.
At first glance, this might seem like just another capital restructuring between large corporations. But to me, it holds essential lessons in “reversible management.”
What’s particularly noteworthy is Mizuho’s aim for “equity-method accounting.” This isn’t a full acquisition but a decision to maintain influence without full integration. In other words, it’s a capital strategy that leaves room to turn back.
Designing Reversibility in Capital Relationships
What’s behind Mizuho’s choice of equity-method accounting for Rakuten Card?
Full ownership would streamline management integration. However, pulling out or renegotiating the relationship afterward would be extremely difficult. With equity-method accounting, flexibility remains to adjust the stake as circumstances change.
This is a thought-provoking decision for SME owners, too.
For example, when considering a business or capital alliance with another company, should you aim for “full integration” from the start? Or is it wiser to begin with a partial investment or outsourcing arrangement, deepening the relationship gradually?
In my consulting work, I often meet business owners who, upon hearing about a potential partnership or acquisition, jump at the “opportunity of a lifetime.” But a partnership without a “reversible design” often leads to heavy costs down the road.
Why “Equity-Method Accounting” Allows for Reversibility
Simply put, equity-method accounting means having “significant influence without being a subsidiary.” Typically, this involves a voting stake of 20% to 50%.
What are the advantages of this arrangement?
First, you can be involved in management without taking full responsibility. When you make a company a subsidiary, you’re responsible for all its employees, contracts, and debts. With equity-method accounting, your involvement is limited to the scope of your stake.
Second, the barrier to exit is lower. Selling a 20% stake is far easier than selling a 100% stake. It’s easier to find buyers, and price negotiations are more flexible.
Third, it preserves the partner’s autonomy. Full ownership risks demotivating the partner’s management team and stifling their unique strengths. Equity-method accounting allows for collaboration while respecting their independence.
How SMEs Can Mimic “Partial Involvement” Design
So, how can SME owners apply this “equity-method” thinking to their own businesses?
My suggestion is an approach of “start with partial involvement.”
For instance, when entering a new business field, instead of immediately setting up a wholly owned subsidiary, consider making a small investment in an existing small company. Or, when forming a joint venture with a partner, keep your stake below 50%.
This way, if the venture doesn’t take off, you can exit or scale back easily. Conversely, if it succeeds, you can always increase your investment or acquire the company outright.
I once set up a company in Malaysia myself, and I stuck to the principle of “start small, with a way out.” In the end, I had to exit, but because I kept my stake low, I was able to do so without major losses.
The Reversibility of Integration and Separation in the UC Card Merger
The news also mentions a potential merger between Rakuten Card and UC Card. This is another interesting case from a “reversible management” perspective.
UC Card was originally a credit card company under Mitsubishi UFJ Financial Group. It then came under the Rakuten umbrella, and now a merger with Rakuten Card is being considered.
In such integration processes, “system integration” is the biggest hurdle. Merging credit card payment systems and customer management systems requires enormous cost and time. And once integrated, reversing the process is extremely difficult.
The “Irreversibility” of System Integration
Having been involved in many corporate system integration projects, I can say that system integration is a textbook example of an “irreversible decision.”
For example, integrating different core systems involves data migration, master data unification, and business process changes. Once you start, you can’t just say, “Let’s go back.” The data has been transformed, and the processes have been altered. Reversing course would require even more cost and time.
Even for SMEs, similar issues arise when integrating or upgrading accounting or customer management systems. You might decide to implement a new system based solely on the promise of efficiency, only to realize later that the old way was better—but by then, there’s no going back.
Set “Separation Conditions” Before Integration
To avoid this problem, decide on “separation conditions” before you start integration.
In other words, define in advance under what circumstances you will halt or reverse the integration.
For example, set specific conditions like: “Halt if implementation costs exceed 150% of the budget,” “Revert if the error rate exceeds 5% during testing,” or “If exit conditions are met within three months of going live, revert to the original state.”
This “pre-set exit condition” framework is just as effective for large-scale restructurings like Rakuten’s as it is for an SME’s system upgrade.
The Option to “Go Back” in Management Decisions
I believe there’s much for SME owners to learn from the news of Rakuten Group’s financial restructuring.
The key takeaway is: don’t think in terms of “all or nothing.”
When it comes to partnerships, acquisitions, system integrations, or new business ventures, avoid the binary choice of “full integration” or “don’t do it.” Instead, cultivate the habit of considering intermediate options: “start with a part,” “for a limited time,” or “with exit conditions defined.” This is the first step toward “reversible management.”
Just as Mizuho aims for equity-method accounting with Rakuten Card, make sure every major business decision in your company leaves room to turn back.
That margin for error is what creates the organizational flexibility to respond to unexpected changes.
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