Lawyers Still See Obstacles to Foreign M&A in Japan
Linklaters Tokyo partner Hiroya Yamazaki says many Japanese companies aren’t waiting for private equity to step in to begin restructuring themselves. “Companies like NEC and Fujitsu have already gone through downsizing, ” he says “Panasonic, for example, has been doing internal reorganization among groups; salaries of some employees were reduced by as much as 30 percent.”
The private equity business itself seems to be of two minds about Japan. KKR cofounder Henry Kravis said in a recent speech in Hong Kong that he saw increasing opportunity in Japan. The Carlyle Group has likewise raised a $2 billion fund exclusively for Japan investments.
But a number of big names like Advent International and Ripplewood Holdings, a private equity pioneer in Japan, have exited the market. Earlier this year, TPG Capital founder David Bonderman said in an interview on CNBC that Japan was one of the most challenged markets on the globe, citing its aging population and what he saw as the lack of a culture of corporate responsibility.
"Over time, I hate the place," he said.
Yamazaki says there’s no doubt Japan is a tough market. “The population is getting smaller and the market is shrinking, ” he says. “As a profitable asset, Panasonic’s health care unit is attractive to private equities, but not all the assets are attractive. Private equity firms are unlikely to buy unprofitable assets.”