Local Spotlight: M&A Deal Drivers in Japan - Pulse of the Market

By Robert Torio, Content Marketing Manager, APAC

Dealmaker insights from the M&A Deal Drivers: Japan 2021 - M&A growth opportunities in Q4 2020 and beyond webinar hosted by Datasite and Mergermarket

Japan dealmaking is seeing a surge in activity, spurred by a rebound in domestic M&A and an uptick in crossborder deals. Domestic transactions announced in Q3 2020 totaled US$54.11bn across 83 deals, compared with US$7.86bn across 71 deals in Q2 2020. 

Industry consolidation moves appear to have quickened pace and is expected across certain sectors while large companies are also accelerating the pace of non-core divestitures to focus on core businesses. Meanwhile, outbound deals generated US$15.31bn across 27 deals for Q3 2020, representing a 3.42x surge in deal value despite 21 fewer deals compared with 2Q20 (US$4.47bn, 48 deals).

At this recent live panel briefing, we took stock of M&A activity in one of APAC’s major economies and consider the areas that dealmakers should be focusing on. Participants joined Hide Ishii, Partner, Deal Advisory, M&A of KPMG FAS and our panel of leading Japan M&A dealmakers:

• Yuichi Akai, Senior Executive Managing Director & Co-Head of Global Investment Banking Division, Daiwa Securities Co. Ltd. 
• Yoshi Hayashi, Director, Head of Corporate M&A & Alliances, Renesas Electronics
• Naoko Shimura, Partner, Nishimura & Asahi 
• Yoichiro Shimizu, Head of Japan, Datasite

Market sentiment: More than 2/3 now have a positive outlook

In May 2020, we polled dealmakers in APAC about their outlook for M&A in Japan and less than 50% had a positive view while over 30% were negative. Six months later, at least 70% of participants at this briefing have a positive attitude toward the future of Japan’s M&A market.

Mergers and asset purchase/sales expected to dominate

The market expects to see more stressed/distressed companies up come for sale towards the end of this year to Q1 2021 as banks tighten lending. Restructuring businesses, including the sale of domestic and overseas assets, is expected as companies look to lighten their balance sheets.

About 30% of the webinar attendees believe mergers/consolidation will dominate M&A activity in Japan over the next 12 months, while 28% say purchase/sales of domestic assets will be the prevalent transaction. On the other hand, almost a quarter of participants said it will be the purchase/sales of foreign assets. 

Fast and virtual dealmaking

Technology’s role in dealmaking is now more important than ever.

At least 40% of respondents said that the capability to completely due diligence virtually is key to getting M&A deals done today. Meanwhile, over 30% believe tools that increase dealmaking speed and efficiency are the most important. 

According to Mergermarket, Japan’s MA& market expects to see more stressed/distressed companies up come for sale towards the end of this year to Q1 2021 as banks tighten lending.

Restructuring businesses, including the sale of domestic and overseas assets, is expected as companies look to lighten their balance sheets. What sort of opportunities, and in what industries, should dealmakers focus on? Watch the webinar recording to learn more.