People walk in front of Tokyo Stock Exchange on July 19, 2023, in Tokyo.AP/YONHAP
TOKYO — Global private equity firms are going shopping in Japan, where a weak yen and a looming tax hike on wealthy business owners are bringing a flood of companies onto the market.
Large companies shedding noncore businesses, and smaller firms looking for successors have added to the supply, with the number of deals hitting a record. The yen traded in the 158 range against the dollar on Tuesday morning.
Japan-related mergers and acquisitions (M&A) totaled 3,883 from January to September, the most for the period since records began in 1985, Japan’s Nikkei business daily reported Tuesday, citing M&A research firm Recof Data. Foreign companies and investors bought 326 Japanese companies, more than 20 percent above the previous high for the period, set last year.
The value of foreign acquisitions rose 40 percent to 6.2 trillion yen, already topping last year's total. The total value of all deals, including domestic ones, fell 21.1 percent because last year’s figure had been swollen by megadeals such as a full takeover by the Tokyo-based telecom NTT of spinoff NTT Data Group, but foreign buying kept growing.
A heavier tax burden on high earners is one reason more companies are up for sale. Starting next year, Japan will tighten its so-called minimum tax, which lowers the exemption threshold while raising the rate, which could raise the bill for founders and owner-managers who make large gains from selling their stakes.
Owner-managers have increasingly been asking potential investors whether they could buy their companies quickly, several fund officials told the Nikkei.
Aging owners in search of successors are adding to the supply. Deals for business succession numbered 833 from January to September, up more than 10 percent from a year earlier and the most since comparable data became available in 2007.
People walk across a crosswalk in the Ginza shopping district of Tokyo on March 31, 2023.AP/YONHAP
Private equity firms are the main buyers. Large deals have come one after another, including Apollo Global Management’s acquisition of glassmaker Nippon Sheet Glass and KKR’s planned buyout of chemical maker Taiyo Holdings.
Swedish investment firm EQT and a consortium of LY Corporation and Bain Capital have been fighting over Kakaku.com, which runs the restaurant review and search service Tabelog. The LY-Bain group answered EQT’s tender offer with rival proposals, and the contest has turned into a bidding war.
The funds have plenty of money to spend. Bain plans to put about half of the $10.5 billion fund for Asia announced in May into Japan. Particularly prevalent are deals in which buyers acquire a listed company and pull it from the bourse to streamline operations.
Changes at Japanese companies are also drawing foreign money. Since the Tokyo Stock Exchange called on listed companies in 2023 to improve their capital efficiency and corporate value, more of them have been selling off low-profit and noncore businesses. Renesas Electronics, for one, sold its timing business, which makes components that keep electronic circuits running properly, to U.S. chipmaker SiTime.
An aerial view of the skyscrapers and densely packed buildings is seen from an observation deck in Tokyo on Jan. 29, 2021.AP/YONHAP
Tokyo's Ministry of Economy, Trade and Industry’s Guidelines for Corporate Takeovers, issued the same year, have also reshaped the market.
Rising interest rates could make acquisitions more expensive to finance. But many in the market expect the impact to be limited because Japanese rates remain lower than those in other countries, the Nikkei reported.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
