Japan's outbound M&A wave will sweep up minnows
29/12/2015 04:00
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By Quentin Webb
HONG KONG, Dec 29 (Reuters Breakingviews) - Corporate
minnows will join whales in Japan's outbound merger wave. While
Tokyo-listed blue-chips are set to continue their overseas
shopping spree in 2016, smaller companies are also increasingly
ready to stage bold foreign raids.
A flurry of financial-sector tie-ups helped Japanese
dealmakers to another banner year in 2015, with outbound mergers
and acquisitions nearing $77 billion by early December.
The flood of cross-border deals looks set to continue. The
combination of Japan's low-growth market, shrinking population
and super-low borrowing costs makes it very tempting to venture
abroad. Despite having completed foreign purchases, titans like
Canon 7751.T , Mitsubishi UFJ 8306.T and Nippon Life openly
hunger for more.
In general, Japanese mid-cap companies are more conservative
and less international than their larger brethren. But they face
the same existential challenges. Indeed, for those that earn
more of their sales at home, the pressure to diversify is even
greater.
Recent deals suggest mindsets are shifting at midsize firms.
Printer-maker Brother Industries 6448.T bought Britain's
Domino Printing for $1.6 billion, while unlisted publisher
Nikkei snapped up the Financial Times for $1.3 billion.
There will be upsets. Japanese acquirers often settle on
very full prices, making it harder for deals to pay off
financially, especially if the target has little overlap with
the buyer's existing business. Cultural differences can make it
harder to ensure head office and subsidiaries are pulling in the
same direction. And the bigger the deal, relative to the buyer's
size, the higher the stakes.
The swell of outbound activity only emphasises how few
foreign buyers bid for Japanese groups. More inbound M&A would
be a logical consequence of the push for greater shareholder
power now underway in Japan. Yet it remains a hard sell with
local boards, institutional investors and politicians.
Perhaps it will take the high-profile failure of some
outbound M&A deals to reverse the flow. In the coming year,
however, it will be Japanese companies that do most of the
buying.
On Twitter https://twitter.com/qtwebb.
CONTEXT NEWS
- Japanese buyers notched up a record $86.5 billion of
cross-border mergers and acquisitions in the year to Dec. 29,
2015, according to Thomson Reuters data.
- The biggest deals were Tokio Marine's $7.5 billion
purchase of HCC Insurance; Japan Post's $6 billion acquisition
of Australia's Toll Holdings; and a $10.4 billion investment in
China's CITIC by trading house Itochu alongside Thailand's CP
Group.
- For previous columns by the author, Reuters customers can
click on WEBB/
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(Editing by Peter Thal Larsen and Katrina Hamlin)
((quentin.webb@thomsonreuters.com;)(Reuters
Messaging:)(quentin.webb.thomsonreuters.com@reuters.net))
Keywords: JAPAN M&A/BREAKINGVIEWS