Japan Cross-Border M&A:
Analyzing growth and opportunities ahead
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Japan Cross-Border M&A:
Analyzing growth and opportunities ahead


Cross-border M&A continues to provide an important source of value creation for corporations around the globe, accounting for 36% of the overall market in 2016, a 5% increase from 2015. Among countries whose corporations are looking beyond their borders for growth, decision-makers in Japan are increasingly driven to explore international deals. Japan cross-border M&A has more than doubled in just over a decade, with outbound deals accounting for 51% of total M&A volume in 2016.



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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:

 
Shrinking population

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.









 

 
Slow domestic growth

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.




 
 



 
 
 
Demand for market share, global competitiveness and innovation

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.



50% of global ranking by market cap in 1990

2% of global ranking by market cap in 2017





 
Supportive political environment and accounting policies and low funding costs

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?

- CONSUMER, FINANCIAL INSTITUTIONS AND INSURANCE
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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.



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