Cross-border M&A advisory services
for business expansion to Japan
and building partnerships
with local Japanese companies

Japan’s Economy / Business Environment Overview

Ranked as the 3rd largest GDP in the world, Japan is known for having a large and sophisticated market where the consumer and customer expect a high quality from their manufactured goods and services. It can be said that being successful in the Japanese market can lead to success in other Asian markets and/or global markets. According to Fortune magazine, 57 out of the 500 companies listed on the “Fortune Global 500” (an annual ranking of the largest 500 companies worldwide as measured by total revenue) were headquartered in Japan, ranking the country 3rd following only the US and China.

Japan is also known for its high standard of living and its business environment. With a highly-developed transportation infrastructure/system, stable source of electricity and water supply, and a safe/secure community, Japan offers an attractive environment where people can live and work with a peace of mind. According to the World Economic Forum's "The Global Competitiveness Report 2014-2015", Japan has been ranked as the 1st in the world for “Business Sophistication.” (Source: Japan External Trade Organization (JETRO) "JETRO Invest Japan Report 2016" "WHY JAPAN?" 5 reasons to invest in JAPAN ")

Japan: Inbound investments and M&A trends

2015 was a record year for direct investment stock, with the total amount reaching 24.4 trillion yen, a 2.7% increase from the previous year. This trend can be interpreted as an increased expectation for the Japanese market.
From a regional perspective, Europe represents the largest investor in Japan, investing 11.2 trillion yen (46%), followed by North America (7.0 trillion yen (28.8%)) and Asia (4.3 trillion yen (17.6%)). In recent years, one of the more noticeable trend is the growing investments amount into Japan from the Asian region.
By industry, the finance and insurance industry is the largest industry, accounting for 36.6% of the total investment amount, followed by transport machine equipment manufacturing (13.1%), electrical machinery and equipment manufacturing (12.8%), wholesale and retail trade (5.6%), chemical and pharmaceutical manufacturing (4.5%).
Looking more closely at cross-border M&A between a foreign and Japanese company (“Out-In”), inbound investments continue their upward trend, as the first half of 2016 has already reached 2.7 trillion yen, which would be considered as the 2nd highest amount for cross-border transactions next the record year 2007 (3.6 trillion yen).
(Source: Japan External Trade Organization (JETRO) "JETRO Invest Japan Report 2016")

Selected Out-In M&A Transaction from 2015 to the 1st half of 2016 (Jan to Jun) are as follows.
<Selected Out-In M&A Transaction from 2015 to the 1st half of 2016 (Jan to Jun)>
Acquirer Target Company Transaction Type Transaction Amount (Mil JPY)
Tencent【China】 Supercell【Finland】 Acquisition 770,000
Foxconn Technology Group【Taiwan】 Sharp Corporation Acquisition 388,811
Qualcomm【US】 Epcos(High-frequency related business) Acquisition 360,000
Platinum Equity【US】 PrimeSource Acquisition 100,000
Leo Pharma【Denmark】 Astellas Pharma Asset purchase 89,572
AstraZeneca【UK】 Takeda Pharmaceutical Asset purchase 69,350
Genting Hong Kong【Hong Kong】 Crystal Cruises(NYK Group)【US】 Acquisition 65,912
Midea【China】 Toshiba Lifestyle (Home Appliances Business) Acquisition 53,700
Bain Capital【US】 Ooedo Onsen Holdings Acquisition 50,000
Heatherseed Limited【Hong Kong】 Joyful Honda Minority Stake 38,927
Emperador【Philippine】 Beam Suntory Asset purchase 37,100
Freudenberg and Toray 【Germany】 Japan Vilene Acquisition(TOB + minority squeeze out) 35,434
Equinix【US】 Bit-isle Acquisition(TOB + minority squeeze out) 33,912
Autoliv【Sweden】 Nissin Kogyo (Autolive Nissin Brake System Japan) Acquisition 33,200
Sucampo【Switzerland】 R-Tech Ueno Acquisition(TOB + minority squeeze out) 33,186
Sinocare Group【China】 Nipro Diagnostics Acquisition 32,700
Canadian Solar【Canada】 Recurrent Energy Acquisition 30,470
Shenzhen Runjingshiye【China】 Toppan Leefung Printing【China】 Acquisition 30,158
Carlyle Fund【US】and Hitachi Metals Techno Management Hitachi Metals Techno Acquisition(MBO・TOB) 29,286
Alibaba Group【China】and Foxconn Technology Group【Taiwan】 SoftBank Robotics Holdings Minority Stake 29,000

Legend)
- 【 】denotes company's Country
- In principal, a company whose Japanese capital accounts for 50% or more is defined as a Japanese company
- Source:Recof M&A database, SPEEDA, company website

M&A with a Japanese company – potential issues and mitigates

  • > Difficulties in developing a mutual understanding stemming from differences in business practices, corporate culture and languages
    Traditionally in a cross-border M&A transaction, developing a deep mutual understanding is complicated by the differences in corporate culture, corporate values, and business practices. To deepen the trust and understanding, it is essential to overcome the language and cultural barriers by thoroughly addressing and being adaptive to each other’s business objectives and corporate values.
  • > Building a trusting relationship between management
    As mentioned above, building a trusting relationship between the management team is essential to a successful M&A and is particularly true in a cross-border transaction that involves differing business practices, corporate culture and languages.
    Having a meeting between top management early in the process, allows for an open exchange of business objectives and needs, which can help foster a trusting relationship.
  • > Business objectives and deal structuring
    When considering a cross-border M&A there are many variables to examine, such as local laws and regulations, differences in business practices, and business objectives for each company and their stakeholders. To help realize a successful cross-border M&A, it is important to structure a deal which fully incorporates these business objectives and one that captures these objectives in contractual agreement (i.e. shareholders agreement)
  • > Strategies for managing Japanese stakeholders
    There have been cases, where Japanese labor unions, employees, customers/suppliers, and their financial institutions have shown an anxiety toward accepting a foreign partner. In such a scenario, this anxiety can be detrimental to on-going customer relationships as well as the relationship between management and their employees.
    To circumvent these types of issues with the stakeholders, it is important to not only address the contractual obligations (cited in a definitive agreement) but to also have the foresight to plan and manage, through timely intervention, the potential reaction of the stakeholders. It is without saying that throughout the M&A process, it is of the utmost importance to manage confidential information and to prevent any information leakage to the stakeholders.

Cross-border M&A advisory services for business expansion to Japan and building partnerships with local Japanese companies

In 2016, Amidas Partners established a subsidiary in Hong Kong to help support the cross-border efforts of foreign companies looking to invest in the Japanese market or to establish a business partnership with a local company.
Our team of experienced and international professionals, offer our clients our unique expertise in M&A advisory services that will help realize and maximize the corporate value of their company.
Customized deal team:
We cater to our clients by customizing a team that best services the needs for each deal (i.e. country or nationality specific deal).
Our multi-cultural team of professionals are fluent in multiple languages, (Japanese, English, and Chinese) and will help minimizing the risk of miscommunication that may arise from communicating in a different language.
Managing the M&A process:
One of our strength is how we manage the M&A process.
As mentioned above, we believe that it is particularly important in a cross-border M&A to build a trusting relationship between the management teams.
While we customize our deal approach and uniquely manage each M&A opportunity, we believe it is important to set up a management meeting early in the process.
To realize a smooth integration after the execution of the cross-border M&A, we believe that during the negotiation phase, it is critical to have a solid understanding of each stakeholders needs so that it can be incorporated and reflected in the structure of the deal.
Managing risk in post-merger integration:
By utilizing our past cross-border M&A experience and by working in tandem with industry specialist (i.e. lawyers, accountants, and tax consultants) we are able to advise our clients on potential risks and offer countermeasures on issues that arise from differences in laws and regulations and business practices in the likely to arise in the post-merger integration phase.

Cross-border M&A advisory results related to building partnerships with Japanese companies

Client Transaction Overview Our Services
Mitsubishi Materials Corporation (“MMC”) MMC sales their 100% subsidiary Tamadai Corporation (“Tamdai.”) to Dalian Jinyu Metal Products Co., Ltd.
[Tamadai is a manufacturer of automotive aluminum die casted products.]
  • Identified candidate companies and initiated approach
  • Deal structuring
  • Managed due diligence process
  • Performed corporate valuation
  • Negotiated terms and conditions with key customers
Kyowa DC, Inc. (“KD”) KD was sold to Tamadai Corporation (a Dalian Peng Cheng Group company) through a company split to help turnaround and support its restructuring efforts.
[KD is a manufacturer and distributor of aluminum die cast hydraulic components/products.]
  • Identified sponsors and initiated approach
  • Help coordinate amongst key stakeholders (customers, financial institutions / banks, SME Business Rehabilitation Support Co-operative, etc.)
  • Deal structuring
  • Negotiated terms and conditions with financial institutions
Keiyo Butsuryu Co., Ltd (“KB”) Japan Self Storage Corporation (“JSSC”) (Tokyo) was established as a joint venture between KB and General Storage Company Limited (a 100% subsidiary of the publically listed company, Singaporean Post)
[JSSC was formed to help expand the self-storage business in Japan.]
  • Negotiated with relevant parties and coordinated with government authorities
  • Supported negotiations
  • Performed corporate valuation on the newly formed joint venture
  • Help develop the business plan for the newly established joint venture.
  • Preparation of various legal agreements
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