EA-TOKYO ARTICLES & ADVICE
Entrepreneur Association of Tokyo – M&A Train not derailed by credit crunch
2009-October
With the credit crunch and a global recession many people would say that this would be the death nail for enthusiasm towards aggressive cross border acquisitions – especially in a Japan that is busy tightening it’s belt - we spoke with Allan Jardine of Infinity Partners.
A lot of people in Japan are worried about the current state of the Japanese economy. What are your views on this? Our view on the current state is one of relativism. While the Anglo-Saxon originated financial crisis certainly has had a negative impact on Japan, it has, by definition affected, the West more seriously – which in the wider sense was not a simple economic bubble collapse, but a collapse of a financial bubble, based on an already atrophied industrial base. Therefore looking forward, we see Japan as a relative safe haven, based on its position as a leading industrial nation and the Japanese language acting as buffer against the worst excesses of globalisation while, supporting domestic consumption. So in summary, I am not worried about the Japanese economy to a great degree, rather recent turbulence is an opportunity for repositioning that should be in Japan’s long tern interest, and is a strategic opportunity not to be wasted.
As M&A advisors, what is your opinion of the current state of that sector in Japan?
M&A has come a long way in the last 10 years, and can be said to be now a normal part of the Japanese economic landscape. We deal almost exclusively with cross-border M&A, and so although I understand that domestic M&A is healthy, many foreign financial and strategic investors have pulled back their acquisition efforts in Japan, due to their own positions, or to be more precise, their investors pulling in their horns to add liquidity at home. However, there are still may opportunities and many service areas that could benefit from the infusion of foreign capital, international networks and new ideas from overseas. There are many excellent Japanese midsize players with strong fundamentals and the ability to participate in the large, high growth markets of Asia, such as China, India, Vietnam and Thailand, taking advantage of that region’s quasi decoupled status from the Western economies. There are many good opportunities in Japan at the moment, and now both the atmosphere and the market valuations are creating an environment that offers high quality Japanese companies for serious consideration. While the tendency may be that the Japan cross border M&A train had reversed, and the dominant direction is now clearly outbound, there still are many inbound opportunities and although the global credit shortage gave rise to more attractive pricing, this is tempered by the relative strength of the Yen, which would underline my earlier point about the underlying strength of the Japanese economy.
Allan Jardine is Representative Partner of Infinity Partners LLC, a globally operating, Tokyo-based Japanese Cross Border M&A firm with partners in over 40 countries worldwide. Allan may be contacted at allan.jardine@infinity-partners.com
