Libmonster ID: JP-1212
Author(s) of the publication: D. Y. ZORIN

According to most experts, the most significant feature of modern economic globalization is the transnationalization of production. So, the famous American economist Leslie Turow explains the essence of economic globalization as follows: "For the first time in the history of mankind, you can make and sell anything anywhere. In capitalist economies, this means that every component and operation is made in the part of the world where the products or services received can be manufactured most cheaply and sold most expensively, and where the greatest profit can be made. Cost minimization and revenue maximization - this is the essence of profit maximization, which is the core of the capitalist enterprise. Sentimental attachment to any geographical area of the world is alien to this system. 1

The main actors of economic globalization are multinational companies (TNCs). Mergers and acquisitions of companies, primarily foreign ones (relative to the headquarters of TNCs), play an important role in their creation and expansion.

This is a very complex process, especially when it comes to foreign companies with an excellent overall business and corporate culture, such as the Japanese one. In the Land of the Rising Sun, despite the acceleration of changes caused by the long-term economic stagnation that began in the 1990s, there are still remnants of patriarchy, veiled xenophobia and the hypertrophied role of personal relationships, unlike in other developed countries, especially in the United States, where purely business calculations prevail.

In this regard, the article by D. Y. Zorin, a post-graduate student of the State Academy of Advanced Training and Retraining of Personnel for Construction and Housing and Communal Services of Russia, on some features of mergers and acquisitions in modern Japan, may be of interest.

Japan Keywords: mergers and acquisitions, global crisis

Mergers and acquisitions of companies (M & A*) are one of the most common ways of development that most even the most successful companies currently resort to. In modern conditions, this process is becoming a common phenomenon, almost everyday, but the global financial and economic crisis introduces its own specific features. It is during the crisis that mergers and acquisitions become particularly important: many companies their competitiveness, while others cannot resist hostile mergers and acquisitions.

The experience of mergers and acquisitions in Japan is of particular interest, as the financial crisis led to a 45.3% drop in the capitalization (monetary value of securities) in the country's stock market in 2008.2, and at the same time, Japan remains the leader in mergers and acquisitions in the Asia-Pacific region (APR).

In the first quarter of 2009, when the total number of M & A transactions in the Asia-Pacific region decreased by 19% compared to 2008, Japan's share increased to 30.6% of the total value of these transactions worth $30 billion, while China's share was 19.5% ($19.6 billion). At the same time, it can be noted that domestic growth in Japan for such transactions amounted to 76% of the level of 2008, the crisis affected their number, and many Japanese companies take over other companies (Figure 1). As part of efforts to overcome the crisis, companies pay more attention to the management group, and parent companies pay more attention to the management group in order to for rapid management decision-making, 100% control of the main subsidiaries is preferred.

Currently, Japanese banks account for 9% of international bank lending, they occupy the 3rd place.

* The term M & A is used to describe the economic processes of business and capital consolidation that occur at the macro-and micro-economic levels . from the English Mergers and Acquisitions - mergers and acquisitions).

page 54


Figure 1. Mergers and acquisitions in the Asia-Pacific region.

Источник: Japan Regains Regional M&A Lead // The Wall Street Journal, 2.06.2009 - http://online.wsj.com/article/SB124385117176771783.html

in the world, losing 2nd place to the United States -10%. London, the world's largest financial center, remains the leader. London-based banks account for 19% of international bank lending. The total amount of assets managed from Tokyo is $2.05 trillion (2.6 trillion pounds (approximately $3.28 trillion) is managed from London, and $2.3 trillion is managed from New York) .3
Japanese companies themselves were rarely subject to mergers and acquisitions until a few years ago. This was caused by the permanent structure of shareholders, as well as the negative attitude of the public opinion of the countries, which considers acquisitions an unethical type of business. Legal provisions, such as the pre-1999 ban on using shares for repayment, are also considered an obstacle to M & A operations.

The number of international mergers and acquisitions in Japan is still significantly lower than in Europe and the United States: only 0.58% of this figure is in Europe (EU) and 2.35% in the United States4. However, this very fact shows that Japan has a huge untapped potential in this area, provided by a high level of economy.

Key economic indicators are driving the growth of mergers and acquisitions between Japanese and foreign companies: deregulation in Japan is progressing rapidly in a number of industries (for example, retail), owners of small and medium-sized enterprises are increasingly facing increasing succession problems, and in some cases financial difficulties, Japanese companies are relatively often undervalued in some cases, the real value of the company significantly exceeds the market capitalization in recent years.

In addition, changes to the Japanese Commercial code since May 2007 have simplified M & A operations and, consequently, also hostile takeovers. Now not only Japanese but also foreign companies are allowed to use their own shares to pay for acquisitions. In all likelihood, amendments to the tax legislation will also make mergers and acquisitions more attractive to foreign investors.

Acquisitions by foreign players of Japanese firms attract more attention from the Japanese business community and the general public than mergers and acquisitions between Japanese participants alone. In particular, in the iron and steel industry, the partners ' hostile takeover of Soto in 2004 provoked a negative reaction.

A crisis situation in the economy may increase unfriendly takeovers in the Japanese economy. On the other hand, the prospect of acquiring suitable companies in Japan, which has a strong economy, offers huge untapped potential.

It is not surprising that the Japanese market is so attractive for foreign companies. Despite its low growth rate, Japan remains the second-largest economy in the world. The high sales potential attracts foreign companies. In addition, Japan's high purchasing power gives it a larger margin in some market segments than in any other country.

The main goal of many projects-

Figure 2. Number of patents per million inhabitants (2008).

Источник: The International Patent System Yearly Review. Developments and Performance in 2008. WIPO.

page 55
When acquiring Japanese companies, this means access to technology, products and relevant research, as industrial Japanese companies are technology leaders in many important areas. For example, almost 3/4 of all industrial robots are designed and built in Japan.5 Toyota and Honda have led the international market for hybrid vehicle engines, and the fate of new mobile communication applications remains literally in Japanese hands. Almost 3/4 of all digital cameras and DVD recorders are also produced under Japanese licenses, as is every 2nd new plasma TV.

Many foreign corporations see Japanese companies as a springboard for entering and conquering the markets of China and ASEAN countries. Japan is one of the key investors and trading partners in the region. So, in China, imports from Japan are 2 times higher than those from the United States and 3 times higher than those from Germany. In addition, Japan is the number one supplier for countries such as Indonesia, Thailand and Malaysia. In Thailand, imports from Japan exceed those from the United States (the 2nd largest supplier) by 3x6.

The goals of mergers and acquisitions may be different, but synergy is almost always expected, when the profit after the merger of 2 companies may exceed the sum of the profits of these companies before the merger. This is achieved through operational, functional and financial synergy, reduction of the tax burden, and acquisition of corporate control in companies with a weak management structure and dispersed ownership structure.7
Thus, the sources of operational synergy in the acquisition of a company that does business in the same area as the buyer can be: economies of scale, the ability to increase the price of goods and services due to less competition and increased market share, which should lead to higher margins and operating income, combining business advantages when a firm with large investment opportunities is able to marketing opportunities are acquired by a company with a good subject and production specialization, as well as accelerated promotion in new or existing markets.

The source of functional synergy can be, for example, the acquisition of a company with high - yield projects and limited cash resources, and financial synergy-the acquisition of a company with good financial performance indicators, a positive reputation in business circles and the availability of free cash flows, which increases the ability of the acquiring company to attract loans and increase cash flows.

Each M&A transaction necessarily involves combining some of its existing functions and operations with newly acquired companies. 8
In this case, the following problems occurred in Japan::

- the absence of a preparatory stage related to the acquired Japanese company, about which the buyer knew either little or nothing;

- language barrier;

- differences in mentality;

- lack of information on specific conditions of the Japanese market.

The biggest problem is the lack of involvement of Japanese workers in the integration process. Another serious drawback was the excessive attention to production at the expense of studying the peculiarities of the Japanese market.

If a foreign company did not take an active part in the study of the specifics of managing local personnel, this also created big problems with achieving synergy. Elements of the principle of seniority still exist in the work of Japanese companies, and recruitment from outside is also difficult, since Japanese workers tend to consider their company more like a family than a business asset.

Overall, the financial benefits of mergers and acquisitions in Japan cannot be realized quickly. Buyers tend to underestimate local customs, and cultural differences are more important for successful integration in Japan than in Western countries.

Two different cultures can be combined by creating joint projects in which the company's employees work as a team until the new product is released to the foreign market, as well as joint study and leisure activities, in particular, holidays.

And since Japanese companies do not have completely identical structures, it is not always possible to clearly distinguish local customs from the specific specifics of the company itself. Even in areas that are typically typical of Japan , such as cultivating a long-term relationship with a supplier or a seniority system, these relationships are not the same across industries. Differences exist more in sales, marketing, and logistics than in manufacturing.

Japan is one of the key investors and trading partners in East Asia and the Asia-Pacific region as a whole. Therefore, it is possible to predict an increase in international mergers and acquisitions in the Japanese market both in the context of the current slow recovery of the global economy from the downturn, and in the post-crisis period.

Thurow Lester C. 1 The Future of Capitalism. How Today's Economic Forces Shape Tomorrow's World. William Morrow and Company, Inc., N.Y., 1996, p. 115.

2 Annual report and statistics 2008. World Federation of exchanges.

3 London Stock Exchange / / Website of the London Stock Exchange - www.london-stockexchange.com

4 United Rentals Acquires Industrial Rental Company in Ohio // Business Wire, 21.06.2009.

Saito Y. 5 How is the Selection Mechanism of Companies Working? // FRI Research Report, N 346, 26.06.2009.

6 United Rentals...

Endovitsky D. A. 7 Motivational approach in the analysis of investment attractiveness of the company-the purpose of merger / acquisition / / Economic analysis: theory and practice, 2008, No. 4.

Saito Y. 8 Op. cit.


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D. Y. ZORIN, MERGERS AND ACQUISITIONS IN JAPAN // Tokyo: Japan (ELIB.JP). Updated: 20.08.2023. URL: https://elib.jp/m/articles/view/MERGERS-AND-ACQUISITIONS-IN-JAPAN (date of access: 10.02.2025).

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