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Japanese M&A transactions are soaring

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For the first half of this year, the number of mergers and acquisitions (M&As) by Japanese companies reached its highest level in 36 years since statistics were first compiled in 1985. Japanese companies are evaluating M&A strategies to restructure their industries and create the industry of the future by focusing on digital technology. Japan’s advancement of digitalization appears to be spurred in large part by the Covid-19 era of non-face-to-face and non-contact communication.

hitachi m&a
In July, the M&A trend continued. A total of 2,473 transactions were reported in July this year, another record high.

The Nihon Keizai Shimbun reported on the 10th that the number of M&A deals completed by Japanese companies through June increased 17% from the same period last year. A total of 8.4 trillion yen was transacted, a 2.8-fold increase over the same period last year. This is the second largest amount ever.

Hitachi, a Japanese electrical, electronics, and heavy industry company, acquired Global Logic, a U.S. information technology (IT) company, in March for 1.5 trillion yen. Hitachi is mobilizing enterprise-wide capabilities to shift its focus from traditional manufacturing fields such as heavy industry and power generation to 4th Industrial Revolution fields such as Internet of Things (IoT) and artificial intelligence (AI).

This recent sale of Hitachi Metals and Hitachi Construction Equipment took place in the context of large selling, as the IT sector relevance is diminishing. Similarly, Panasonic also acquired U.S. software giant Blueyonder for about 760 billion yen. This is the largest deal since Panasonic was founded.

Densan (Nippon Electric Co., Ltd.) is synonymous with aggressive mergers and acquisitions. The company recently formed a joint venture with Honghai Precision Industrial Group, the parent company of Taiwan’s Foxphone, to develop and sell electric vehicle (EV) motors. Although this is not a merger and acquisition, the company is expanding into new industrial markets such as EVs through joint ventures.

Last month, Sumitomo Mitsui Financial Group, one of Japan’s three largest megabanks, signed a business alliance with U.S. financial giant Jeffrey Financial Group to support overseas M&A activities for Japanese companies. A subsidiary of the company, Sumitomo Mitsui Bank, will acquire up to 4.9 percent of Jeffrey’s shares, and the price is expected to be 42 billion yen. This is the first time a major Japanese financial institution has invested in a U.S. investment bank since the 2008 global financial crisis.

The expansion of Japanese mergers and acquisitions is also linked to the restructuring of the Tokyo Stock Exchange.

There are four parts to the Tokyo Stock Exchange, including the first and second parts of the Tokyo Stock Exchange, Mothers and Jasdaq. The “Prime” market targeting blue chip companies will start from April 2013 while the two lower markets, Standard and Gross, will be converted. Prime market entry requirements have become more stringent in recent years. To be listed on the Prime market, the outstanding shares must have a market capitalization of at least 10 billion yen.

For MetaNews.

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Jonathan Hobbs

Jonathan Hobbs is an Australian investor and author that trades on a variety of asset classes, including currencies, equities, and commodities. Jonathan’s experience as a macro trader leverages his unique writing style to combine important elements, such as technical analysis and news. The other elements that he brings into his unique writing styles are foundation analysis aimed at rational equilibrium values, evaluating the sizes and motivations of buyers and sellers, as well as identifying the needs of the buyers and sellers in the individual markets. Jonathan is committed to quality writing for new traders as well as veterans.

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