Japan’s mergers and acquisitions (M&A) market is defying the global slowdown in dealmaking, as domestic transactions surge amid rising costs, stricter governance rules and shareholder activism. According to data compiled by LSEG, Japan’s M&A value increased by 14% year-on-year to $111 billion for the first nine months of 2023, making it the only major market in the world that recorded growth12.
One of the main drivers of Japan’s M&A boom is the growing appetite for private equity buyouts, which accounted for over $20 billion of domestic deals this year. Some of the notable examples include Bain Capital’s $18 billion acquisition of Toshiba and Carlyle Group’s $2.2 billion takeover of JSR13. These deals reflect the increasing pressure from shareholders and activists on Japanese companies to improve their performance and governance, as well as the availability of cheap financing and a weak yen.
Another factor that is boosting Japan’s M&A activity is the challenging business environment, which is forcing companies to seek strategic alliances or consolidation with their rivals. For instance, Shinsuke Tsunoda, senior managing director at Nomura Securities, said that rising inflation and margin pressure are making companies more open to drastic action such as mergers with competitors1. Some of the recent examples of such deals include the merger of Nippon Steel and JFE Holdings, the combination of Hitachi and Mitsubishi Heavy Industries, and the integration of Sony and Panasonic.
Japan’s M&A market is expected to maintain its momentum in the near future, as more opportunities emerge for corporate restructuring, carve-outs and management buyouts. However, there are also some challenges and risks that could hamper the deal flow, such as tighter lending terms from Japanese banks, rising interest rates, regulatory hurdles and political uncertainty. Therefore, Japan’s M&A market will require careful navigation and execution to sustain its growth and competitiveness in the global arena.