May 25, 2020

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

By Robert Torio, Content Marketing Manager, APAC

Part 1 of a two-part blog series featuring insights from the Deal Drivers: Japan webinar hosted by Datasite and Mergermarket

 

Early this year, Japan appeared set to chart a course for another prosperous year of M&A activity following a record Q4 2019 that saw US$ 40.9bn in announced deals.

However, with the novel coronavirus outbreak putting a freeze on outbound transactions and domestic deals under increased scrutiny, earlier banner year predictions have been replaced with uncertainty.

At our recent live virtual briefing, more than 500 dealmakers across Japan and the rest of Asia Pacific joined our panellists:

  • Yoshinobu Agu, Managing Director, Head of M&A Division, Citigroup Global Markets
  • Yoichiro Shimizu, Datasite’s Head of Japan

as Mai Mizuta, Mergermarket’s Asia-Pacific Editor & Acuris Japan Bureau Chief led the conversation around M&A activity in Japan in Q1 2020. They also discussed inbound and outbound deal flow trends that dealmakers should focus on to stay ahead and ride out the COVID-19 crisis.

 

Market Sentiment: Less than 50% now have a positive outlook

According to the Deal Drivers: Japan Q1 2020 report published by Mergermarket and Datasite, dealmaking in Japan was holding steady in the first quarter despite the threat of COVID-19.

However, less than half of dealmakers now have a positive outlook for M&A in Japan for the coming months.

 
Asset purchase/sales expected to dominate

How Japan Inc fares through the crisis and beyond has yet to be seen, but corporates are sitting on large cash piles -- US$ 4.8trn according to corporate filings submitted in September 2019 -- that may enable them to weather the storm and be better placed to pursue new M&A opportunities once the worst of the pandemic has passed. Japanese companies are also expected to continue with their restructuring and consolidation plans during this time, according to the report.

Most dealmakers in APAC seem to agree with this assessment, however, a fifth of respondents during the webinar think bankruptcy cases would also be significant in the next 12 months.

 
Getting deals done while teleworking

Japan’s state of emergency was lifted for 39/47 prefectures in the middle of May, paving the way for businesses to gradually resume operations. However, regions such as Tokyo remain under a state of emergency.

Given that deals in Japan are almost always conducted face-to-face, our panellists also considered how Japanese dealmakers are managing deals while working remotely.

It appears that dealmakers in Japan have learned to quickly adapt to the ‘new normal’, with more than 75% saying that the ability to complete due diligence activities virtually or remotely is currently the most important aspect of technology they need to get deals done.

 

Read Part 2 - Expert Insights

Gain insight from our panel of experts as they take stock of the response to date in one of Asia Pacific’s major economies and consider the areas where financial stress is of greatest concern for dealmakers in Japan.

 

Deal Drivers: Japan Webinar On-demand

In the meantime, you can watch on-demand the live briefing Deal Drivers: Japan -- A spotlight on mergers and acquisitions in Japan Q1 2020 and beyond and learn more about how dealmakers in and around Japan are responding to the COVID-19 crisis.

Watch Webinar

Deal Drivers: Japan Q1 2020 Report

Despite COVID-19 in Q1 2020, Japanese M&A was not hit as hard as expected, and, in fact, saw a year-on-year increase in deal value.

Download report

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