Asia: More inbound Japan M&A questioned

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Japan’s prime minister is trying to inject some dynamism into the country. Could inbound M&A business start to match the upturn in the outbound market?

Shinzo Abe-R-600
Prime minister Shinzo Abe has shaken up the economy


Tokyo’s main airport Narita was recently described to Euromoney as nothing much more than a transit hub for M&A bankers.

In the past, convincing dealmakers that there were fees of any substance to be made from inbound Japanese M&A would be a difficult job indeed. Bankers often cite cultural barriers and the opposition to selling as hurdles that have always stood in the way of what, on the face of it, is a target-rich environment with the potential to generate significant annual revenues.

Back in 2012, there were only 136 Japan inbound deals with a total value of around $7.5 billion – small fry for a market of that size.

Market in flux

But Japan is a market in flux. Prime minister Shinzo Abe has shaken up the economy and is trying his best to inject more dynamism into a country that has suffered from comparatively poor growth next to some of its Asian neighbours, particularly China. 

The Japanese outbound market has boomed this year, with huge deals being cut for companies in a diverse range of markets, marking a new trend of acquisitive behaviour among large Japanese corporates. And now it also seems more inbound inquiries are reaching the ears of M&A bankers, raising the prospect that inbound business may further juice up the country’s buoyant cross-border M&A scene.

Factors that may stoke inbound business include the cheap Japanese yen, which can make company valuations look better, but also among Japan’s ageing population there could be many older entrepreneurs who may feel now is the right time to cash in on their businesses.

Japanese outbound M&A has been a bright spot this year for many investment banks, with the pipeline expected to stay robust as corporates plan more ventures into overseas markets. The potential for more inbound business is yet to be realised, but signs are now pointing towards a traditionally weak market coming to life. The cynics will remain unconvinced, but for those who have benefited from the rush of outbound deals, they will be ready to join the party if inbound takes off as well.