Japan’s big money is still on the table

Japan’s companies have billions of dollars to spend and are “very much up for it” when it comes to buying foreign businesses.

That was the message I heard this week from a senior figure based in the City of London who regularly brokers huge international deals.

I also learned that Japanese companies have made many recent acquisitions, each worth than a billion dollars, in the United States and are prepared to buy more American companies, if Donald Trump allows.

I gained these useful insights at a conference at the London Stock Exchange organised by Skadden, an international law firm. (The organisers have asked me not to name the conference speakers in my blog but I am free to share what they said.)

I received the strong impression that Japan still seeks big M&A deals, despite a perception of risk in the UK, the EU and the United States.

Naturally, the Brexit affects the way Japan sees the United Kingdom.

A high level representative of the Japanese government said he is disappointed that Britain is no longer the gateway to the EU. In the past, he said, Britain pressed Europe to trade more with Japan but Britain’s influence on EU policy disappeared following the Brexit vote. However, a cheap pound could make British companies appear good value for money to Japanese buyers.

One British businessman said he thought that the Japanese are “in denial” about the Brexit. “They know in their heads it’s going to happen,” he said. “But they don’t seem to believe it in their hearts.”

There is also “a general increase in nervousness” about Europe, according to the senior banker I mentioned at the start of this blog. However, he reminded us that last year the Japanese company Sumitomo spent 750 million Euros buying the banana company Fyffes, which is based in Ireland, part of the EU.

So what about the investment climate in the United States under Mr Trump’s administration? In his inaugural address Mr Trump said American institutions must not be bought by foreigners and “asset stripped.” Does that make him protectionist and anti-Japanese?

The American experts at the conference said Mr Trump’s views on company takeovers and corporation tax remain ambiguous, although they praised him for creating “a business-friendly environment.”

“One of Trump’s consistent themes is jobs,” said a speaker. “If he thinks a deal will create American jobs, he will go for it,” he said.

Japanese companies are interested in expanding their international operations because of weak economic growth at home (although that is now picking up according to this very insightful article in the Financial Times).

The panellists said the companies which are most attractive to Japanese buyers include those involved in pharmaceuticals, the financial sector and healthcare. However, they held back from naming any companies which they believe are currently potential takeover targets for the Japanese. It is always risky to name such names – especially at a conference organised by lawyers in the middle of a stock exchange!

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