Tokyo, March 9: Corporate Japan's struggle to restructure its way back to growth is opening the door wider to mergers and acquisitions (M&A) by foreign firms eyeing potential profits amid the nation's economic adversity.The trend is expected to gather steam as Japanese companies face growing competition owing to domestic deregulation and markets that are becoming ever more global, M&A experts say.
A weak yen, limp share prices and lower real estate values mean foreign firms looking to buy can get more bang for their buck than at any time in the past decade.
Even if the Tokyo's key 225-share Nikkei average manages to regain last year's closing level of 18,000, it would still be less than half its all-time record close of 38,915.87.
``The number of transactions involving foreign firms in Japan is definitely increasing because the yen is very weak and stock prices are very low compared to 10 years ago, so it's advantageous from the view point of foreign investors,'' said an M&A expert at a majorJapanese commercial bank.
Total M&A activity involving Japanese firms rose to 754 cases in 1997 -- the highest level since 1990. Of those, 51 deals involved investment by foreign companies, up from 33 the previous year, according to private data.
``It's minuscule from the US perspective, but relative to three-four years ago we have a lot more activity,'' said Nicholas Benes of M&A boutique Japan Transaction Partners.
The shift has been aided by a change in attitude in government corridors of power, where officials now tout mergers and acquisitions by foreign firms as a way to breathe new life into the nation's stagnant economy.
``In the midst of a situation of economic grid lock, bringing foreign management resources into Japan is good for the economy overall, so we want to...facilitate foreign direct investment including M&A,'' said director Shigeru Hotta of the trade ministry's international business affairs division.
As part of that effort, some regulatory obstacles are being cleared away,including the lifting of a decades-old ban on holding companies and an easing of Japan's Fair Trade Commission's (FTC) stance on market share.
The push to restructure and prospects that competition will heat up as deregulation proceeds, meanwhile, are making firms more amenable to being on the sell side of M&A deals.
``Looking around at people going under is increasing a sense of `must act, which starts to overcome the lethargy in organisations and make it more tolerable for a company head to consider buying or being bought,'' Benes said. ``And deregulation is leading to a faster pace of change that must be coped with -- the time frame to adapt is now two or three years, not 15.''
In a sign of the greater respectability of M&A activity, Tokyo Chamber of Commerce will set up in April a match-making market for small and medium-sized firms seeking to be acquired, the trade ministry's Hotta said. The decision follows a similar move by the Osaka Chamber of Commerce last year.
``Traditionally, Japanesemanagement had resistance towards being acquired, but now they are thinking about the situation differently,'' the Japanese bank M&A expert said. ``For example, if their employees will be happy under the new ownership, it's OK. Or, if being acquired means sales proceeds may increase three-fold, it would be economically advantageous.''
