Japan Inc regains appetite for foreign acquisitions


TOKYO – Japanese companies are starting to accelerate their expansion abroad, with the value of outbound mergers and acquisitions rising in the second quarter to nearly six times the amount recorded during its pandemic low.

Japan Inc. closed 182 deals in the April-June period, up 56% from a year ago, with a total value up 455% to 2.16 trillion yen (19 billion dollars), according to data from mergers and acquisitions consulting firm Recof.

The resumption of deals signifies Japan’s thirst for growth, especially as the country faces a declining population, with the accelerated rollout of vaccines encouraging economic optimism.

Japanese companies were in a global wave of mergers and acquisitions before the coronavirus outbreak, as more companies sought to diversify their businesses and invest abroad. In 2019, the total number of overseas acquisitions reached an all-time high of 826.

After the pandemic hit, many companies curtailed investment as concerns about the global economy and supply chain disruptions increased. Many companies have also prioritized protecting their employees and preserving their cash flow rather than increasing their investments.

However, as vaccine deployment accelerates in some countries and global superpowers like the United States and China show signs of economic recovery, Japan’s appetite for cross-border mergers and acquisitions is gradually recovering.

In the second quarter, overseas acquisitions accelerated even compared to the January-March period. The number of transactions increased by 29% compared to the first quarter, while the total value increased by 9%.

The total transaction value for the first half of 2021 has already reached 4.1 trillion yen, on par with the overall 2020 transaction value of 4.4 trillion yen.

BIZIT, which operates an online investment matching platform under global M&A consultancy GCA Corp., said, “The momentum of overseas acquisitions is starting to pick up, with more companies that have accessed our platform in the past two to three months.

The biggest acquisition announced so far this year has been for Hitachi. The electrical equipment company is set to acquire US software developer GlobalLogic for $ 9.6 billion in a bid to advance Lumada, its key Internet of Things platform.

Another Japanese electronics company, Panasonic, is also planning to complete its acquisition of Blue Yonder, a US developer of supply chain management systems, for $ 7.1 billion – its biggest acquisition in a decade.

“Most of the ongoing deals are Japanese companies buying software makers or IT-related companies,” said Keishi Sakakibara, head of cross-border transactions at Nihon M&A Center, the world’s largest independent M&A firm. from Japan.

He points out that software makers are easier to buy than manufacturers because “travel restrictions make it difficult for companies to visit factories abroad.” He added, “Japanese companies are reluctant to buy without actually seeing the factories and operations of the seller.”

Tech investment conglomerate SoftBank Group also injected nearly $ 3 billion in new funding by purchasing a 40% stake in AutoStore, a Norway-based robotics company specializing in warehouse automation technology. Together, they seek to capture the growth of the logistics market as the pandemic drives online shopping.

While the biggest deals were mostly the acquisitions of Japanese companies by Western companies, smaller deals in Asia continue to grow in number.

BIZIT notes that demand to buy from companies in Singapore and Vietnam has been strong. Both countries have demonstrated economic resilience through the implementation of strict virus control measures.

Sakakibara, of the Nihon M&A Center, expects deals to continue to grow as countries reopen business travel and vaccination accelerates.

Japan aims to complete vaccination of its citizens by October or November. “I think the cross-border M&A market will have good prospects from next year as vaccinations progress.”

Meanwhile, BIZIT points out that there have been some difficulties in making deals. “While sellers want the deal to be at the highest price possible, the impacts of COVID on revenues make it difficult for buyers and sellers to agree on a price,” he said, resulting in the postponement of certain agreements.

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