TOKYO Oct 16 Japanese companies outside the
banking sector were sitting on more than $2.6 trillion in cash
and deposits at the end of June - a warchest fattened by a
strong yen that is driving another record year of outbound
Bankers say telecoms firm Softbank Corp's $20
billion bid for Sprint Nextel Corp of the United States,
announced on Monday, may be an outlier in Japanese finance - a
deal so bold it could only be pulled off by the firm's audacious
chief, Masayoshi Son.
But that deal has put an exclamation mark on the emergence
of Japanese companies as aggressive overseas buyers, a trend
that has gathered pace over the past two years and shows no
signs of abating even as Europe's debt crisis drags on and as
global growth wanes.
Central bank data shows Japan's corporate warchest has grown
steadily over the past decade and topped 200 trillion yen for
the first time on a calendar basis last year.
Junji Horinouchi, head of global M&A consulting at Mercer
Japan, said companies in healthcare, chemicals and technology
would be among the most active deal seekers given their need to
build scale to compete globally.
Healthcare, where top drugmaker Takeda Pharmaceutical Co
has been an active acquirer, accounted for almost a
third of the total value of overseas deals last year, followed
by materials at 20 percent. High tech made up just 5 percent of
"I see big opportunities in sectors burdened with heavy
research and development costs or industries where establishing
a presence in key global markets would be tough through organic
growth alone," Horinouchi said.
Bankers said Japanese trading house and consumer-related
sectors will also continue to snap up assets at a healthy pace,
barring a global recession or sharp reversal of yen strength
. In May, trading house Marubeni Corp bid $3.6
billion for U.S. grain merchant Gavilon LLC.
"Yes, there is concern about the economy, but there is also
an understanding that M&A is a way to establish yourself as a
global company," said Jerome Finck, managing director at
Rothschild Japan. "With the strong yen now is the time to do
The Softbank deal, if completed, would bring Japan Inc's
tally of outbound acquisitions this year to about $75 billion,
topping last year's $69 billion, a record in dollar terms,
Thomson Reuters data shows.
The active dealmaking reflects a common need among companies
to secure growth outside a mature Japanese market and has been
fuelled by the currency's one-third rise against the dollar
since late 2007, making acquisitions less costly in yen terms.
Japan's spending on overseas deals ranks second in the world
this year, behind the United States' $158 billion, but ahead of
recent big spenders China, on $46 billion.
Bankers said near term it was unlikely there would be any
more deals on the scale of Softbank's bid for Sprint, which is
set to top Japan Tobacco's $19 billion purchase of
Gallaher in 2007 as the largest overseas by a Japanese firm.
But Rothschild Japan's Finck says the Softbank acquisition
highlights a growing willingness among Japanese executives to
consider large, so-called transformational deals in addition to
smaller, bolt-on transactions.
Among deals announced over the past few months, advertising
giant Dentsu Inc said it would pay $5 billion for
British media buyer Aegis, while trading house Toyota
Tsusho has bid for French distribution firm CFAO
in a two-step acquisition that could reach $3 billion.
Japanese firms have announced 14 outbound acquisitions worth
at least $2 billion each since 2011, up from 5 over the previous
two years. A total of 10 multi-billion dollar deals were signed
in 2008 when Japanese firms took advantage of the financial
crisis to pick up assets on the cheap.
But not all investment bankers are optimistic.
Some believe the current flurry of acquisitions could mark a
dealmaking peak, especially if the global economy slows further,
as was predicted in new forecasts from the International
Monetary Fund last week.
"With the Japanese economy in such a poor state and given
the increasingly uncertain outlook globally, there are a growing
number of Japanese executives who are unsure of just how
aggressive they should be with M&A," said a Tokyo-based banker
at a Western investment bank.