The findings came from the Japanese M&A consulting firm Recof, which summarised the status of acquisitions in which Japanese companies participated as either buyers or sellers, including investments. The total surpassed the 4,280 cases seen in 2021, which was itself the highest number since the company began tracking data in 1985.
The number of acquisitions of Japanese companies by domestic and foreign investment entities increased by 3% to 1,071, the highest number since 1998. The number of business succession deals exceeded 700, accounting for nearly 20% of the total.
While the number of deals rose, the overall value of acquisitions decreased by 32% to ¥11.43 trillion (US$87.2 billion), the first drop in two years.
Though the value of such deals between Japanese corporations increased by 26% to ¥4 trillion, the value of acquisitions of overseas businesses by Japanese companies decreased by half to ¥3.47 trillion. Among the factors for the trend was the lower number of large-scale mergers and acquisitions compared to the previous year.
The value of acquisitions of Japanese businesses by foreign companies also decreased by about 40% to ¥3.95 trillion.
Investment firms made their presence known through carve-outs, in which a company separates a non-core business or subsidiary by selling an interest to outside investors.
The largest acquisition involving a Japanese company was a tender offer for Hitachi Transport System by US investment company KKR, with a purchase price of roughly ¥670 billion. HTS parent company Hitachi proceeded to reorganise its group by selling listed subsidiaries via the carve-out method.
As the economy recovers from the coronavirus pandemic, many Japanese companies have opted to concentrate their resources on specific business lines.
Japanese optics giant Olympus announced in August that it would sell off its science business – which handles industrial microscopes and other products – to Bain Capital of the US. The sale, which exceeded ¥400 billion, gave Olympus the opportunity to focus resources on medical equipment such as endoscopes, one of its primary areas.
In mergers and acquisitions initiated by corporations, a significant number of cases were related to digital transformation. Sony acquired US gaming company Bungie, with the goal of developing intellectual property cultivated through games into entertainment content for the Sony Group. The purchase price was originally expected to be around ¥400 billion, but the sudden depreciation of the yen pushed it to more than ¥500 billion.
In another deal, Japanese healthcare equipment manufacturer Omron invested approximately ¥110 billion in JMDC, a Japanese medical data analysis company. “Digital transformation was an M&A theme for 2022,” said Yuko Yoshitomi, president of Recofdata.
The findings came as the number of takeovers worldwide has fallen. According to financial information company Refinitiv, the number of global cases decreased in 2022 by 20% to about 53,000.
Reasons include Russia’s invasion of Ukraine – increasing uncertainty about the future of the global economy – and interest rate hikes in Europe and the US, reducing corporate appetite for acquisitions. “The number of deals involving European and US tech companies, which previously had an aggressive stance towards M&As, is rapidly decreasing,” one market insider said.
“We will continue to see a large number of deals between domestic companies due to the recovery from the Covid-19 pandemic,” Hideyuki Ishii, partner at management consultancy KPMG FAS, said of trends for 2023. “There is a possibility that the number of projects involving overseas companies will decrease due to the slowdown of the global economy.”