May 13, 2013
The Resurgence of Japanese Outbound M&A
Here’s an excerpt from this Skadden Arps’ memo about Japanese M&A:
The Nikkei has skyrocketed more than 50 percent over the last six months. Goldman Sachs has issued a report predicting a further 20 percent gain in the index before year-end. Japanese companies were the third-most active group of acquirers in the world in 2012, behind only the U.S. and virtually tied with Canada for second place.
This ferment of activity is taking place largely under the radar — as global attention is far more focused on the potential economic effects accompanying China’s emergence on the world stage.
What are the drivers of this uptick in Japanese outbound M&A activity? Is it sustainable? What are the challenges for the Japanese economy and its private sector? What are some practical tips for bridging the inevitable cultural gaps associated with Japanese company dealmaking? The following discusses what is happening in Japan to magnify its participation in the global M&A marketplace and what the future may hold.
Trending Upward: A Look at Record Japanese Activity
From the vantage point of the U.S. M&A market, Japan was the top inbound acquirer of U.S. targets in 2012, with more than one-quarter of the market share of deal value. By contrast, China represented about 7 percent of deal value and was only the fifth-most active acquirer of U.S. companies last year. While Japan’s 2012 figure certainly was impacted by the $20.1 billion Softbank/Sprint megadeal announced in October, the country’s participation in the U.S. M&A market has been trending steadily upward since 2009. Viewed over a longer period of time, Japanese outbound M&A activity is at an all-time high, far surpassing the late 1980s when Japanese investors were buying Rockefeller Center, Pebble Beach, Columbia Pictures and other high-profile assets worldwide. In fact, the deal value of outbound Japanese M&A in 2012 was more than three times that of 1990, considered the peak year of that era. Yet this resurgence of deal flow has not been a center of focus in the news media today, reflecting our view that Japanese companies appear to be welcome buyers in today’s environment.