(Bloomberg) -- Dealmaking is booming in Japan. 

Management buyouts are on the rise. The stock market is nearing an all-time high, giving companies more scope for acquisitions. And the government and investors are pressuring companies to bolster growth. All of this is adding up to a wave of deals in the country. 

“This can be a year that we will remember as the dawning year of Japan’s M&A era,” said Akira Kiyota, head of global mergers and acquisitions at Nomura’s main brokerage subsidiary. “We will likely see significant growth both in the number and volumes of deals.”

The volume of mergers and acquisitions linked to the country has grown 43% so far this year to $67.4 billion, building on a similar pace from the last quarter of 2023, according to data compiled by Bloomberg. In contrast, the volume of deals in the Asia-Pacific region excluding Japan dropped to the lowest in almost a decade. 

Marquee deals in the first two months of this year include overseas acquisitions by Japanese firms despite the yen weakening past 150 to the dollar. 

Renesas Electronics Corp. agreed to buy software firm Altium Ltd. for A$9.1 billion ($6 billion) the biggest-ever acquisition of an Australian-listed company by a Japanese buyer. Homebuilder Sekisui House Ltd. expanded in the US by snapping up US builder MDC Holdings Inc. for $4.9 billion. 

“Just because the yen is weak, doesn’t mean you stop doing deals,” said Jeff Acton, a partner at the boutique investment banking firm BDA Partners Inc. in Tokyo. “It’s driven by strategic growth priorities.” 

Private equity exits, corporate divestitures, management buyouts and overseas buying will fuel more M&A activity this year, according to Acton. His firm is planning to add two to three people in the next twelve months to help with the deal flow. 

The M&A deal boom has echoes in other markets. The economy’s emergence from the deflation that has plagued it for decades has enlivened trading in the bond market, setting off a race to hire traders and brokers. The resurgent stock market is keeping Japanese equity analysts busy writing reports and pitching to overseas investors.

“The sales team put out my schedule and it was filled very, very quickly,” said Bruce Kirk, Goldman Sachs Group Inc.’s chief Japan equity strategist, citing his recent travel to Hong Kong.  “I’ve never been more popular.”

Firms will likely carry on with “large-scale” transactions this year, including acquisitions abroad and companies going private, in addition to the divesting of non-core business and subsidiaries, Nomura’s Kiyota said. 

As a result, competition for investment banking business is intensifying in Tokyo’s financial industry, setting the market apart from elsewhere in Asia, even if there are bright spots in markets like India and Australia. Most notably, dealmaking has slowed in Hong Kong as China has cracked down on the property, tech and finance industries, giving bankers in the city more free time and anxiety over their future. 

Japan-related deals accounted for 22% of Asia’s entire transaction volumes for 2023, the highest in four years, according to data compiled by Bloomberg. In one of the biggest deals in the country last year, Toshiba Corp. was taken private in September in a ¥2 trillion ($13.3 billion) buyout.  

Nippon Steel Corp. also announced a plan in December to buy United States Steel Corp. for $14.1 billion in a move that would create the world’s second largest steel company. 


“It’s reasonable to assume that for the next couple of years Japan could remain the largest fee pool in Asia Pacific and where we’re gonna see more deal activity than in other markets,” said Peter Guenthardt, Bank of America Corp.’s head of Asia-Pacific global corporate and investment banking.

Pressure from the government and investors is stoking transactions. Life insurers and asset managers in Japan are joining activist shareholders in calling for governance reforms and companies are more open to deals as a result, according to Yoshihiko Yano, head of M&A at Goldman Sachs in Tokyo. Investors have grown more proactive in opposing the reappointment of directors at shareholders meetings if they don’t like the company’s strategy.

“There are still some executives in Japan who don’t feel much responsibility when their company’s share price falls,” Yano said. But “they wouldn’t be able to shrug it off as someone else’s problem” should shareholders give them a support rate of below 80% as opposed to 90% or higher which used to be the norm in Japan, he said.

Atsushi Tatsuguchi, general manager of Mitsubishi UFJ Morgan Stanley Securities Co.’s M&A advisory group, is betting that more companies will go private this year so managers can more easily carry out overhauls.

An example of this is Japanese telecommunication company KDDI Corp. and trading house Mitsubishi Corp. agreeing to take convenience store chain Lawson Inc. private in a deal worth ¥496.5 billion, seeking to accelerate efforts to digitize the business. 

Japan companies are also under pressure to become more open to accepting offers from abroad, after merger guidelines announced last year by the government called on firms to make “sincere considerations” when they get proposals from potential buyers.

“We are receiving an increasing number of inquiries from global players as they begin to more realistically consider proposing takeovers,” said Nomura’s Kiyota. “Even those Japanese companies that have previously slammed the door on takeover bids without offering any clear reasons are now forced to seriously consider them.”

A shift in mentality has also taken place within Japanese blue chip companies, according to Koichiro Doi, JPMorgan Chase & Co.’s Japan head for M&A. Whereas in the past, directors were hesitant about mergers and acquisitions, last year marked what he termed a more rational approach. 

“The Japanese market is likely to attract global attention this year,” said Doi. 

--With assistance from Manuel Baigorri, Takashi Nakamichi and Takako Taniguchi.

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