M&A is back in Japan
Today I read an interesting article in the Wall Street Journal with the following title: "Japanese Deal Making Gives Bankers Some Solace". It says that, according to Dealogic, Banker's revenues made from M&A in Japan jumped 60% in 2008 while it decreased more than 33% globally.
It is definitely something investors cannot ignore. The bull market of 2006-2007 was driven by excess liquidity for once but more importantly by uninterrupted M&A deals. Everyday there was a M&A deal that pushed expectation and valuation higher like Arcelor and Mittal, Inbev and Anheuser Busch and many others bigger or smaller deals ... However, M&A deals were almost none existent in Japan for many reasons and as a result kept investors away from that market, which explained the under-performance of Japanese equity in 2007. But the revival of M&A in Japan in the past few weeks could be the trigger for a period of stronger performance of the Nikkei225 compare to its peers indexes.
Japan is a very particular country with a cultural past much different from the one of Europe or the United States. The past few years many Japanese CEOs rejected offers from foreign companies or foreign private equity firms. Japanese have a great sens of pride that you can track back from the time of the Samurai. Also during World War II, everybody remembers those "Kamikaze" who would crash themselves into US military buildings. CEOs are known for acting in a similar way. So to see that over the past few weeks we had three big M&A deals in Japan (Nippon Oil/Nippon Mining, Panasonic/Sanyo Electric and more recently talks between three Non Life Insurance companies) is very positive for the equity market. I believe there will be more M&A deals in Japan and probably more than in Europe and United States in 2009 and 2010 for the following reasons:
Blog Directory It is definitely something investors cannot ignore. The bull market of 2006-2007 was driven by excess liquidity for once but more importantly by uninterrupted M&A deals. Everyday there was a M&A deal that pushed expectation and valuation higher like Arcelor and Mittal, Inbev and Anheuser Busch and many others bigger or smaller deals ... However, M&A deals were almost none existent in Japan for many reasons and as a result kept investors away from that market, which explained the under-performance of Japanese equity in 2007. But the revival of M&A in Japan in the past few weeks could be the trigger for a period of stronger performance of the Nikkei225 compare to its peers indexes.
Japan is a very particular country with a cultural past much different from the one of Europe or the United States. The past few years many Japanese CEOs rejected offers from foreign companies or foreign private equity firms. Japanese have a great sens of pride that you can track back from the time of the Samurai. Also during World War II, everybody remembers those "Kamikaze" who would crash themselves into US military buildings. CEOs are known for acting in a similar way. So to see that over the past few weeks we had three big M&A deals in Japan (Nippon Oil/Nippon Mining, Panasonic/Sanyo Electric and more recently talks between three Non Life Insurance companies) is very positive for the equity market. I believe there will be more M&A deals in Japan and probably more than in Europe and United States in 2009 and 2010 for the following reasons:
- Japan did not enjoy the restructuration European and US industries had in the past few years and as a result today there are too many small players in Japanese industries .
- Japanese leading industries are export oriented and the strength of their currency on top of the world recession will slow down their internal growth enormously. External growth is going to be key to remain competitive worldwide.
- Japanese companies are seating on a lot of cash and today is a big opportunity for them to use it.
- Japanese companies have been reducing leverage since the equity bubble of the 1990's and have room to take on more debt.
- Japanese banks are willing to lend money, which is not the case in Europe or the United States.