NEW YORK/TOKYO Dec 20 (Reuters) - Japan's companies spent a record amount in 2012 to acquire assets outside of their economically moribund country, up 24 percent from the previous year, as a strong yen turned foreign companies with a strong growth potential into bargains.
Investment bankers say 2012, which saw the largest foreign purchase on record by a Japanese company, may have marked a fundamental shift in corporate Japan's attitude to foreign mergers and acquisitions that could spell even more deals ahead.
"There's been a marked change in approach by the large Japanese (corporation), who now realize the need to diversify," said Gregg Lemkau, head of M&A for Europe and Asia at Goldman Sachs. "They seem to have woken up in a way that has made them much more competitive in cross-border M&A situations."
Softbank Corp's audacious $20.1 billion takeover of 70 percent of U.S.-based Sprint Nextel Corp, which has yet to be finalized, was the largest ever acquisition by a Japanese company of a foreign target.
All in all, Japanese companies spent nearly $84 billion in outbound M&A in 2012 in over 655 deals, up from $68 billion in 2011, according to Thomson Reuters data.
Other major deals included Dentsu's $5 billion acquisition of UK-based media firm Aegis Group PLC and Marubeni Corp's $3.6 billion purchase of U.S. grain company Gavilon Group LLC.
"The two big themes are going to be more big strategic deals, and more cross-border flow," said Christopher Lawrence, New York based deputy chairman of Global Investment Banking at Rothschild.
Japan's gross domestic product during the third quarter contracted 0.9 percent and the economy minister, Tatsushi Shikano, said the country has fallen into a recession. Japan's population is also shrinking and aging, with two out of every five people 65 or older.
Combined with the impact of a currency that has appreciated rapidly since 2007 and cash-rich corporate balance sheets that have lightened their debt load since the 1990s, many Japanese companies are now looking abroad for growth.
Although the yen has taken a hit since last week's election, bankers don't expect this to impact deal flow significantly.
"I expect Japanese companies to continue seeking overseas assets despite the recent yen weakness," said Kensaku Bessho, managing director and head of the M&A advisory group at Mitsubishi UFJ Morgan Stanley Securities Co Ltd. "They know they need to maximize growth opportunities outside Japan because of fundamental problems in their home country, namely the shrinking population and anemic economic growth."
Nearly 75 percent of the cross-border acquisitions by Japanese companies this year have been made in the United States.
"Japanese buyers view the U.S. as a large, stable market at a time when Japan's economy is slowing and the outlook for Europe remains uncertain," said Jonathan Rouner, head of international M&A at Nomura Securities.
Prior to the Sprint deal, the largest deal of this kind was Japan Tobacco's $15 billion acquisition of UK-based Gallagher Group in 2007, followed by Takeda Pharmaceutical's purchase of Switzerland's Nycomed SCA for $13.6 billion in 2011.