Downed tools LBO flags Japan security weak spot

Makino Milling Machine Co

30/04/2026 12:38

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hudson Lockett

HONG KONG, April 30 (Reuters Breakingviews) - Overseas private equity fund MBK has just dropped its $1.7 billion white knight bid for a Japanese machine tool firm at Tokyo's request on national security grounds. It's the first such rebuff in 18 years, While it provides a second shot at the target for a domestic rival that had been previously outbid, a closer look at the state of the local buyout industry suggests Japan could struggle to provide more homegrown alternatives to unwelcome strategic takeovers.

The takeover drama kicked off in late 2024 when Japanese precision motor maker Nidec 6594.T announced plans for a 257 billion yen ($1.6 billion) unsolicited takeover of Makino Machine Milling 6135.T>. The infamously acquisitive suitor had in just over 50 years snapped up more than 70 other firms, stoking concerns over organic growth. Nidec dropped out in the face of stiff resistance and was replaced by a white knight bid of 275 billion yen from MBK last June.

Just last week, though, Japan’s finance minister, Satsuki Katayama, told parliament that the government had asked MBK to drop its offer after a review under the Foreign Exchange and Foreign Trade Act. That determined the investment "poses a risk of undermining national security” as Makino’s machine tools “are widely used by manufacturers of Japan's defence equipment”. Makino confirmed on Thursday afternoon that MBK would not proceed with the deal and revealed it had received an initial, non-binding takeover offer from Nippon Sangyo Suishin Kiko, a leading domestic buyout shop.

NSSK's Japanese provenance may sit well, but as one of the larger Japanese private equity firms its size relative to foreign peers raises questions about local investors' capacity to mount similar interventions. A 2026 survey of Japan-only private equity shops by HC Asset Management lists only a half dozen or so domestic entities with investment funds larger than 100 billion yen, or $638 million.For NSSK, which per IFR plans to invest 161 billion yen of equity in Makino, the reported figure is equivalent to nearly two-thirds of the 250 billion yen raised in its most recent fund, which closed in April.

Of course, local buyout shops could have more firepower by clubbing together on deals, either with each other or with overseas players like KKR KKR.N, Bain and others. The other option is to try to bulk up the size of the funds they raise from investors themselves, though that's likely to take longer.

Yet they have ample incentive to do so: deal activity in Japan is firmly on the upswing. Prime Minister Sanae Takaichi wants to form national champions through consolidation and is easing arms export rules amid a wider drive to revise her country’s pacifist constitution. The Makino takeover saga has highlighted that national security is an issue not just of ownership but capital, too. The country needs more homegrown sources, and quick.

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CONTEXT NEWS

Private equity firm MBK Partners dropped its 275 billion yen ($1.7 billion) tender offer for Makino Milling Machine on April 30 at the request of Japan's government, which had cited national security concerns in the first such case since 2008. MBK emerged as a white knight in 2025 during Japanese precision motor maker Nidec’s unsolicited bid for Makino.

Nidec, which dropped its offer for Makino in May of 2025, subsequently delayed its financial results and revealed potential accounting lapses at its Italian and Chinese subsidiaries. In March of this year, it flagged potential writedowns of 250 billion yen from the widening scandal.

Makino Machine Milling's takeover saga nears resolution https://www.reuters.com/graphics/BRV-BRV/lgpdggaeovo/chart.png

(Editing by Antony Currie; Production by Shrabani Chakraborty)

((For previous columns by the author, Reuters customers can click on LOCKETT/ hudson.lockett@thomsonreuters.com))