Time was when Japan Inc shunned the heady world of corporate raiders as a vulture club anathema to the country's consensus culture.
When stomached at all, Japanese takeovers typically preyed on foreigners, most notoriously gobbling up US icons like Firestone, 7-Eleven and Columbia Pictures.
But in a sign of new openness in the world's second-largest economy, merger mania has gripped the country and homegrown firms are now among the hunted as well as the hunters.
PHOTO: EPA
Merger and acquisition activity in Japan hit an all time high of 2,775 deals last year, compared with just 260 in 1985. Now, from board rooms to living rooms, Emu ando eh, as M&A are known, has entered common parlance and is upending business as usual.
"Definitely, we are in a merger boom," said Akihiro Watanabe, a partner at the Tokyo-based M&A consultancy GCA Co. "The psychological barriers are falling down."
Investors and business leaders expect the next surge to begin on Tuesday, when a new law takes effect making it easier for foreign companies to buy Japanese rivals through swapping shares, something all but barred in the past.
Foreshadowing the change, a TV show called Hagetaka, or "Vultures," aired earlier this year dramatizing a fictional US investment fund's drive to revive a hapless Japanese bank through unforgiving Western-style reforms.
The program was an unexpected hit. But Japan's grudging acceptance of takeovers as a cutthroat reality of everyday business has been fitful at best.
Takeovers have long been frowned upon in a country that shuns heated showdowns and prizes consensual management. So as not to stigmatize the seller as the "loser," parties typically paint the buyout as a merger of equals.
"The traditional view of your company is that it's your child, and you would never sell your child. But now that attitude is slowly changing," said David Snow, editor of Private Equity International, a specialty publication tracking global deals.
In late 2005, toymaker Takara Co launched a board game called "Game of Life M&A" to tap growing public fascination with the trend. But it pulled the product last year after its chief inspiration, freewheeling entrepreneur Takafumi Horie, was arrested for accounting fraud at Internet firm Livedoor Co, a former darling of the M&A crowd.
Even the merger law taking effect next month was delayed for a year by lawmakers so Japanese companies had time to ready takeover defenses like so-called "poison pills," measures that weaken share prices and make the company less attractive to unwanted suitors.
The new law allows overseas businesses to buy Japanese ones by swapping shares in a domestic subsidiary. That should lighten the load of having to pay cash, as nearly all foreign companies had to do before.
Analysts, bankers and even the government say fresh blood is badly needed.
After slogging through Japan's decade-long slowdown, many Japanese companies are weakened to the point of requiring outside help to restore profits.
Direct foreign investment in Japan amounted to merely 2.1 percent of the country's gross domestic product in 2003, compared with 22 percent in the US and 38 percent in Britain. The government now wants to double the amount of foreign investment by 2010.
Back in 1990, Japanese takeovers of foreign businesses accounted for 61 percent of all M&A activity in the country. That dwindled to just 15 percent last year, said Recof, a market research company based in Tokyo.
The tumble was offset by a surge in domestic deals, which now account for 78 percent and a rise in foreign buyouts of distressed Japanese assets.
The 2,775 M&A deals in Japan last year were but a fraction of 13,691 in the US and 14,702 in Europe, Thomson Financial said. GCA's Watanabe expects the Japanese M&A market to quadruple in the next five to 10 years.
But important milestones are already being chalked.
Just last year, Japan witnessed its first-ever hostile takeover attempt between domestic blue chips when Oji Paper Co tried but failed to buy Hokuetsu Paper Mills.
Also turning heads was Japan's biggest takeover of a foreign firm -- Japan Tobacco's US$15 billion buyout of Britain's Gallaher Group, a deal finalized this month.
Perhaps the biggest watershed was US-based Citigroup's tender offer bid for Japanese brokerage Nikko Cordial. That offer, which runs through on Thursday and is valued at up to US$13.4 billion, would be the largest-ever foreign takeover of a Japanese company.
Today, all the big private equity firms, including Kohlberg Kravis Roberts & Co, Permira and the Carlyle Group, have offices in Japan. Yet, some still gets a vulture's reception.
When the US investment fund Steel Partners announced in February it wanted to take a controlling 66 percent stake in Sapporo Holdings, one of Japan's biggest breweries, the initial response was an emphatic "No."
In an ironic twist, Sapporo and archrival Asahi Breweries Ltd even bandied the idea of a capital tie-up to block the overseas interloper. That fell through and Sapporo has since bolstered its poison pill ramparts as it stalls for time.
Shareholders may be the final arbiter of whether Japan further warms to M&A. After years of suffering interest rates close to zero, average Japanese have entered the stock market by the droves for the first time seeking higher returns.
Unlike the old boy networks that tied up shares between conglomerates and were oft vilified for perpetuating the cozy status quo of Japan's loss-making "zombie" companies, the new breed of private investor has its eyes on profits.
In a nod to the trend, Citigroup boosted its offer for Nikko by 26 percent, after some market players said the first bid was too low.
"You now have shareholders who are willing to listen because they are economically motivated,'' said Scott Callon, chief executive of Ichigo Asset Management in Tokyo. "They'll give it a hard look."
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College
RSS