Importance of expanding overseas and competing on a global scale
In 2010, China had overtaken Japan as the as the world’s second-largest economy as Japan struggled with a stagnant economy. In March 2011, the quake & tsunami disaster disrupted factory production and shook Japanese companies. Earlier, they had focused only on the domestic market and had a reputation of being slow to expand in foreign markets. Now they have realized the importance of expanding overseas and competing globally.
The second-largest acquirers in the world in 2011
In 2011 YTD (through August 31), the number of global M&A deals stood at 617 and were valued at $1.8 trillion. According to Thomson-Reuter, there have been 380 Japanese M&A transactions across the border.
According to Dealogic, in 2010 Japanese firms spent $34.34 billion in global acquisitions. This year until date, they have spent more than $52.5 billion in global acquisitions. This makes them the second-largest acquirers globally this year (U.S. ranks one). A strong yen has helped them though it makes Japanese exports less competitive overseas. In 2008, they had spent a record $68 billion and are on way to exceed that figure.
Are Japan’s Foreign Acquisitions Right?
A Nikkei article reported that of all listed companies (reporting on March 31, 2011) had earned 80% of operating profits overseas. While foreign acquisitions may make the Japanese proud, many analysts think that Japanese firms must be more competitive through domestic consolidation and not be hasty to make acquisitions abroad. Analysts also think that Japanese firms are paying more than the actual valuation.
However, acquisition of U.S. companies will quicken the implementation of internationally recognized best governance practices and help focus on return on investment, which the Japanese give second preference over harmony and lifelong employment.
|Asahi Group Holdings Ltd.||Independent Liquor Ltd.||Brewery||$1.27 billion||One of New Zealand’s largest beer companies|
|Toshiba||Landis & Gyr||Electricity metering equipment||$2.3 billion||Century-old Landis+Gyr, a prominent smart metering firm|
|Takeda Pharmaceutical||Takeda Pharmaceutical||Drug maker||$14 billion||Biggest deal of the year|