Market Spotlight: Japan Deal Momentum

By Robert Torio, Content Marketing Manager, APAC

Mergermarket’s Q1 2021 data shows Japan recorded 125 deals worth US$15.6 billion. This inbound and domestic M&A activity was an increase from the same time last year when deal values reached US$13 billion.

Does this indicate a resurgence in M&A in Japan?

The economic impacts of the pandemic are proving just as varied as its progression rates across APAC. Even though activity has dipped everywhere, some economies are bouncing back more quickly. In Japan, M&A is showing an ongoing resilience against the backdrop of recovery in the region.

At a recent webinar hosted by Mergermarket and Datasite, dealmakers took stock of M&A Q1 2021 activity in Japan. The expert panel also discussed issues that were unique to Japan such as the business succession of founder-based companies and attempts by the national Government to stimulate corporate reorganization.

Yasuhiro Hirabayashi, Japanese Services Leader South East Asia - Deals and Japan Business Development – Singapore at PwC Singapore, led the discussion with panelists:

• Atsushi Tatsuguchi, Managing Director, Mitsubishi UFJ Morgan Stanley
• Yusuke Sahashi, Partner, Anderson Mori Tomotsune
• Nobuki Watanabe, Executive Officer, ORIX Corporation
• Yoichiro Shimizu, Head of Japan, Datasite

Corporate restructuring, PE activity to dominate Japan M&A

Moving into 2021, the IMF predicts growth of 3.3% in 2021 from Japan. Sectors that were leading M&A activity in Japan in Q1 were Industrials and Chemicals (I&C) and Technology, Media, and Telecommunications (TMT). Both sell-side and buy-side are active in Japan with drivers for M&A remaining almost the same as the previous year.

Almost 50% of attendees expect to see corporate carve-outs, divestitures, and restructurings to dominate the M&A activity in 2021, while 41% think high levels of dry powder and PE activity will drive M&A transactions the most. 

Managing challenges of cross-border dealmaking

Panelists shared their views on the challenges and opportunities of cross-border transactions as the degree of travel restriction varied from country to country vis-a-vis their vaccinations. Watanabe said that for overseas deals they work with local staff to conduct M&A (from sourcing to execution) and build direct relationships with the key person on the sell-side for concluding high quality deals.

This was echoed by webinar attendees, when asked about the most important success factors in 2021 M&A across Japan. Almost 60% of dealmakers said strategy and identifying and screening targets will be key. Meanwhile, about a fifth of attendees believes the ability to close deals quickly and virtually will help realize more value.

Efficiency through enhanced technology 

Shimizu noted that the pandemic has spurred the need to enhance the efficiency of M&A processes and added that AI has been instrumental in enabling efficiencies in redaction and document preparation.

More than half of webinar attendees believe due diligence would be the most enhanced by technology/digitization, while 15% see asset marketing benefitting the most.

Shimizu added that Datasite continuously innovates its solutions to address the emerging needs of the M&A community and to enhance dealmaking processes.  To learn more about M&A activity and trends, top deals, top bidders, and hot sectors in Japan, read Deal Drivers: APAC Q1 2021.