As Japan’s stock market approaches a historic high, corporate mergers and acquisitions are increasing. Both the government and investors are encouraging companies to ride the crest of this positive financial growth.
Corporate deals on the rise in Japan
Financial experts believe 2024 may be the year that defines Japan’s mergers and acquisitions era, with a prediction that the numbers and volumes of these deals would surge. Since the start of this year, merger and acquisition volumes increased by 43%, continuing the momentum of the latter part of 2023. That is in stark contrast to the rest of the Asian markets, which are experiencing the lowest deal period in nearly 10 years.
Despite the yen’s weak performance against the dollar, Japanese companies concluded the acquisition of international organisations. Bloomberg reports that Renesas Electronics Corporation 6723 (TYO) finalised an agreement to buy the Australian software outfit Altium Limited (ASX: ALU) for a groundbreaking 9.1bn AUD. Similarly, Sekisui House Limited (SPH: MU) enlarged its US footprint by buying MDC Holding Inc. (NYSE: MDC) for $4.9bn.
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Bloomberg quoted Jeff Acton, a partner at Tokyo-based BDA Partners Inc., who indicated a weak currency is no reason to cease dealmaking as strategic growth indicators drive mergers and acquisitions. Acton further believes “private equity exits, corporate divestitures, management buyouts and overseas buying” will fan the fires of mergers and acquisitions in 2024.
This activity affects other Japanese markets, as evidenced by movements in the bond market and the need to hire traders and brokers. Consequently, competition in Japanese investment banking circles is increasing as opposed to those in other Asian markets. Dealmaking in Hong Kong is much slower, and many chalk it up to China’s clampdown on the property, tech, and finance industries.
