Japanese businesses "hunt" for cross-border M&A targets

With more abundant capital and a more open management model, but the domestic market is gradually running out of room, Japanese businesses are accelerating their search for cross-border mergers and acquisitions (M&A) deals.

With more abundant capital and a more open management model, but the domestic market is gradually running out of room, Japanese businesses are accelerating their search for cross-border mergers and acquisitions (M&A) deals.

Finding ways to divide the more than $4.2 trillion "pie"

News that Japanese companies are looking to M&A larger companies overseas as a surplus of more than $4.2 trillion in cash recently released has sent the market into a tailspin.

This also shows that the domestic market is narrow, forcing Japanese businesses to find growth targets abroad through M&A deals.

According to Yoshinobu Agu, Head of M&A at Citi in Tokyo, in the past few years, the scale of M&A transactions by Japanese companies abroad has been getting larger and larger. The desire of Japanese companies to develop and invest has become much stronger.

In 2023, according to statistics from Recof Data, Japanese enterprises conducted about 660 M&A transactions abroad, up 6% compared to 2022. About 1/3 of the deals took place in the US, followed by the UK (44 deals), Singapore (42 deals) and India (34 deals).

16th VIETNAM M&A FORUM 2024

The prestigious annual event on mergers and acquisitions and investment connections organized by Investment Newspaper under the direction and sponsorship of the Ministry of Planning and Investment , will be held at JW Marriott Saigon Hotel (HCMC) on Wednesday, November 27, 2024.

  With the theme "A Blossoming Market," the Vietnam M&A Forum 2024 will delve into emerging M&A opportunities in promising sectors such as real estate, retail, technology, renewable energy, financial services, and logistics.

  The M&A Forum 2024 will have the following main activities:
- The main conference will feature leading speakers from Vietnam and internationally.
- Honoring outstanding M&A Deals and Consultants in the period 2023 - 2024.
- Release of the M&A Market Panorama 2024 Special Edition (bilingual Vietnamese - English).

Data from S&P Capital IQ Pro shows that overseas M&A deals reached a transaction value of approximately $50.5 billion, an increase of about 7% compared to the previous year. Notably, Nippon Steel's acquisition of US Steel for approximately $14 billion stands out. However, the completion of this deal is being affected by the US presidential election.

In addition, notable deals include: Panasonic Connect's $7.1 billion acquisition of Blue Yonder Group Inc., a US-based independent subsidiary of Panasonic; Renesas Electronics' $5.9 billion (AU$9.1 billion) acquisition of Australian software company Altium; Renesas's $5.7 billion acquisition of Dialog Semiconductor, a UK-German joint venture; and Sekisui House's $4.9 billion acquisition of US-based homebuilder MDC Holdings.

As the domestic M&A market in Japan remains small compared to other developed markets, in order to create a new boom in cross-border M&A transactions, the Japanese Government has implemented corporate governance reforms.

Japanese companies are looking for targets in places with growing economies and young populations, such as Southeast Asia and India, cross-border M&A brokers in Japan say.

While in the US, Japanese companies pursue 100% acquisitions because of market transparency, in Southeast Asia and India they only want minority stakes. The reason is that Japanese companies want to exploit the business networks and government relationships of local executives.

Mr. Yusuke Ojima, Head of ASEAN region of Nihon M&A Center Holdings, assessed that the Japanese domestic market is entering a saturated phase, and growth potential is limited compared to dynamic and rapidly developing economies. The ASEAN region, including countries such as Malaysia,

Singapore, Indonesia, Thailand, and Vietnam offer significant opportunities for Japanese companies seeking diversification and growth.

“By expanding investment in these high-growth markets, Japanese companies not only minimize risks from domestic economic fluctuations, but also take advantage of new opportunities for long-term development and market expansion,” said Mr. Yusuke Ojima.

Want to penetrate deeper into Vietnam

Brokers say capital is not the main problem for Japanese companies. Japanese companies currently enjoy great support from investors. It is important for large companies not to lose the trust of investors.

In the Vietnamese market, Japanese investors are also making strong moves in searching for target companies for M&A.

According to data from the London Stock Exchange Group (LSEG), in the first nine months of 2024, the total value of announced transactions in Asia reached $622 billion, down 0.2% compared to the same period in 2023.

However, the Asia-Pacific region alone increased by 25% year-on-year to $286 billion, of which about 80% of the value of transactions were transacted with one
cross-border partners

Recently, Nihon M&A Center Holdings (Nihon M&A Center) has just established ASEAN to Global Capital (AtoG Capital), a subsidiary specializing in fund management to support Japanese businesses expanding to the ASEAN region, including Vietnam.

Through this fund, AtoG Capital focuses on promoting cross-border M&A opportunities between Japanese companies and SMEs in the ASEAN region.

According to Mr. Yusuke Ojima, AtoG Capital helps Japanese investors create cross-border investment opportunities. “We provide our clients with the resources and expertise necessary to overcome the challenges in international M&A transactions, thereby fostering successful and sustainable partnerships,” said Mr. Yusuke Ojima.

AtoG Capital and Nihon M&A Center both hope to promote ASEAN businesses, especially mid-sized businesses, to help them realize their full potential in the global market.

Specifically, AtoG Capital will support businesses in a two-stage divestment process, assisting with internal restructuring and then supporting the sale of shares through the advisory services of Nihon M&A Center. The fund will ensure compliance with Japanese business standards and provide a clearly structured post-merger integration process, optimizing time and costs for successful divestment transactions.

With expertise in restructuring corporate governance to align with Japanese business standards and providing a clearly structured post-merger integration process, Nihon M&A Center ensures a smooth transition into Japanese business culture.

This investment model helps optimize time and costs for successful divestment transactions, while reducing direct management intervention in strategic decisions, allowing businesses to operate more efficiently.

Since 2020, Nihon M&A Center Vietnam has completed more than 8 deals annually, with average values ​​ranging from US$10 million to US$50 million. These deals span manufacturing, construction, logistics, information technology, and distribution sectors.

The above moves have somewhat relieved the heavy psychological burden on investors, as recently, cross-border M&A deals by foreign investors have been somewhat "slowed down" by strict management measures.

According to Dr. Le Minh Phieu, founding and managing lawyer of LMP Lawyers, the measures proposed are aimed at "tighter" management, but lack consistency and clarity, causing two difficulties.

Firstly, there are difficulties in the buyer's legal due diligence process. Inconsistent and unclear regulations make it difficult for the seller to implement and comply, while the buyer is also unsure what constitutes correct compliance. This leads to differing perceptions of legal issues in the target company's operations, making it difficult to reach a consensus.

“Negotiating relevant terms in the contract such as conditions precedent, warranties and guarantees or indemnities also leads to prolongation,” Mr. Phieu shared.

The second difficulty pointed out by Mr. Phieu is the implementation of legal procedures to close the deal. According to Mr. Phieu, the lack of coordination and clarity makes it quite stressful for the parties when negotiating the preconditions related to legal procedures. Even after negotiations are completed, the parties still have to proceed with anxiety.

However, in the current difficult economic context, M&A is a reasonable strategy to restructure and restore business strength. In fact, after Covid-19 and due to many factors, most businesses will face difficulties in cash flow as well as plans for future business development.

Cooperating with investors and foreign investment funds can help businesses partly overcome immediate financial difficulties, while also providing strategic cooperation for the long-term development of the business.

"Businesses must also constantly seek opportunities to improve their financial capacity, enhance their brand, expand their market, invest in key personnel, and leverage resources and experience in technology, management, operations, and marketing from domestic and international partners," Mr. Phieu said.

Source: https://baodautu.vn/doanh-nghiep-nhat-ban-san-muc-tieu-ma-xuyen-bien-gioi-d229050.html