TOKYO, March 26 Japanese companies have sharply
curtailed overseas acquisitions in the first three months of
2013 in a sign the recent slide in the yen could be taking some
of the steam out of a record boom in outbound deals.
Japanese firms announced $5.5 billion worth of overseas
acquisitions between Jan. 1 and March 20, down 63 percent from
the same quarter a year earlier, while the number of deals fell
by more than a third, data from Thomson Reuters shows.
The slowdown overlapped with a near 20 percent tumble in the
yen against the dollar since mid-November in a sell-off
triggered by the elevation of Shinzo Abe, a proponent of
aggressive monetary easing, to premier.
"The yen is clearly a factor. It makes it more difficult to
buy," said a senior executive in charge of acquisitions at a
Japanese service company. "The yen used to be 70-something to
the dollar. Now suddenly it's in the low 90's. That has an
"But the truth is a lot of Japanese companies have already
completed their major deals. That buying has run its course,"
the executive added, in a nod to the $300 billion worth of
overseas assets snapped up by Japanese firms since 2008.
No one is predicting acquisitions will remain depressed for
long, barring a collapse of the yen or significant change in the
economic environment. Japanese firms are sitting on more than $2
trillion in cash and still view overseas deals as a core
strategy to grow outside their mature home market.
At its current level around 94 per dollar, the yen is
stronger than in early 2008 when the buying boom took off.
"Japanese companies are absolutely awash in cash at the
moment and continue to feel that some of the best investment
opportunities are overseas," said Nicholas Smith, Japan
strategist at CLSA.
While recent yen volatility may have deterred some companies
from initiating new transactions, currency fluctuations will not
put a dent in overseas dealmaking, said Ken Siegel, managing
partner at Morrison & Foerster in Tokyo.
Japanese managers are not as sensitive about currency rates
as their Western counterparts because they tend to assess deals
with a longer time horizon and are not interested in short-term
metrics or the prospects of exiting an investment, Siegel said.
Siegel, who advised Softbank Corp on its $20
billion acquisition of Sprint Nextel Corp last year, said
he expected overseas dealmaking to pick up in the second half of
2013 and sees more inward investment as global property and
private equity firms aim to take advantage of a softer yen.
"The inbound work will pick up by much more than the
outbound work will drop off," Siegel said.