Alongside a change in the traditionally domestically-oriented mindset and reliance on organic growth, Japanese companies are encouraged by a number of demographic and economic trends driving the need for international acquisitions:
After reaching its peak at 128 million in 2008, Japan’s population has steadily declined over the past decade. This trend is expected to continue, resulting in a population of only 88 million by 2060.
This decline has pressed companies to look to international markets for growth opportunities, which they may have previously found within Japan’s borders.
After more than a decade of flat growth, China overtook Japan as the world’s second-largest economy in 2009. Japan’s GDP has remained relatively anemic since, and projections indicate the country’s economy may slide further, with India expected to surpass Japan by 2035.
Japanese corporations are increasingly looking beyond their borders to enter new markets where they can obtain new products and capabilities, access innovation to enhance their competitive positions, or find new drivers of growth. While the Japanese economy once boasted nearly 50% of the world’s top companies by market cap, today only one of the top 50 companies is Japanese, underscoring the impact of a decades-long slide in growth.
Against the urgency of the macro-economic backdrop, outbound deals are further encouraged by a near-zero interest rate environment and supportive domestic policies. Over the past decade, the Japanese government has introduced a number of initiatives to support strategic investments, including the January 2016 announcement from Bank of Japan, signaling its intent to push interest rates below zero after years of keeping them low but positive. Cross-border deals are further encouraged by the increased adoption of International Financial Reporting Standards (IFRS) that make overseas acquisitions easier, from an accounting perspective.
Which sectors are most likely to pursue overseas acquisitions?
BRINGING IT ALL TOGETHER FOR INTERNATIONAL BUYERS AND SELLERS
For international companies evaluating cross-border opportunities, Japanese corporations can be attractive buyers – motivated by their environment, experienced in auction processes, and able to be aggressive on value. Our report discusses key considerations for working with Japanese buyers and sellers, both during and post-acquisition.
This material (including market commentary, market data, observations or the like) has been prepared by personnel in the Mergers & Acquisitions Group of JPMorgan Chase & Co. It has not been reviewed, endorsed or otherwise approved by, and is not a work product of, any research department of JPMorgan Chase & Co. and/or its affiliates (“J.P. Morgan”). Any views or opinions expressed herein are solely those of the individual authors and may differ from the views and opinions expressed by other departments or divisions of J.P. Morgan. This material is for the general information of our clients only and is a “solicitation” only as that term is used within CFTC Rule 1.71 and 23.605 promulgated under the U.S. Commodity Exchange Act.
RESTRICTED DISTRIBUTION: This material is distributed by the relevant J.P. Morgan entities that possess the necessary licenses to distribute the material in the respective countries. This material is proprietary and confidential to J.P. Morgan and is for your personal use only. Any distribution, copy, reprints and/or forward to others is strictly prohibited. This material is intended merely to highlight market developments and is not intended to be comprehensive and does not constitute investment, legal or tax advice, nor does it constitute an offer or solicitation for the purchase or sale of any financial instrument or a recommendation for any investment product or strategy.
Information contained in this material has been obtained from sources believed to be reliable but no representation or warranty is made by J.P. Morgan as to the quality, completeness, accuracy, fitness for a particular purpose or non infringement of such information. In no event shall J.P. Morgan be liable (whether in contract, tort, equity or otherwise) for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction. All information contained herein is as of the date referenced and is subject to change without notice. All market statistics are based on announced transactions. Numbers in various tables may not sum due to rounding.
J.P. Morgan may have positions (long or short), effect transactions, or make markets in securities or financial instruments mentioned herein (or options with respect thereto), or provide advice or loans to, or participate in the underwriting or restructuring of the obligations of, issuers mentioned herein. All transactions presented herein are for illustration purposes only. J.P. Morgan does not make representations or warranties as to the legal, tax, credit, or accounting treatment of any such transactions, or any other effects similar transactions may have on you or your affiliates. You should consult with your own advisors as to such matters.
The use of any third-party trademarks or brand names is for informational purposes only and does not imply an endorsement by JPMorgan Chase & Co. or that such trademark owner has authorized JPMorgan Chase & Co. to promote its products or services.
J.P. Morgan is the marketing name for the investment banking activities of JPMorgan Chase Bank, N.A., J.P. Morgan Limited, J.P. Morgan Securities LLC (member, NYSE), J.P. Morgan Securities plc (authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority), J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188 and regulated by Australian Securities and Investments Commission) and their investment banking affiliates. J. P. Morgan Securities plc is exempt from the licensing provisions of the Financial and Intermediary Services Act, 2002 (South Africa).
For Brazil: Ombudsman J.P. Morgan: 0800-7700847 / email@example.com
For Australia: This material is issued and distributed by JP Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) (regulated by ASIC) for the benefit of “wholesale clients” only. This material does not take into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JP Morgan Australia Limited.
© 2017 JPMorgan Chase & Co. All rights reserved.
Finding opportunities in a dynamic marketExplore Highlights about 2017 M&A Global Outlook
Key drivers behind the trendExplore about China’s Increasing Outbound M&A
Insights from M&A leaders across the regionSee study insights about Asian Corporates Aggressively Using M&A to Pursue Growth