Japan Hits Stock Market High, M&A Also Surges...Up 43% This Year

"This year will be remembered as the dawn of the Japanese mergers and acquisitions (M&A) era." An M&A boom is occurring in Japan, where the stock market rally continues. Companies with increased financial capacity are turning to M&A to strengthen their growth engines.

[Image source=EPA Yonhap News]

According to Bloomberg on the 22nd, the scale of M&A related to Japanese companies so far this year has increased by 43% compared to the same period last year, reaching $67.4 billion (approximately 89.6 trillion KRW). This contrasts sharply with the Asia-Pacific region excluding Japan, where M&A has plummeted to the lowest level in about 10 years. A similar trend was observed in Japan in the fourth quarter of last year. Akira Kiyota, Global Head of Mergers and Acquisitions at Nomura Securities, defined 2024 as "the dawn of the Japanese M&A era," stating "both the number of deals and deal volume will show significant growth."

Buyouts by management themselves have increased immediately. As the Japanese stock market races toward an all-time high, companies' acquisition capacity has also expanded. Despite the confirmed yen weakness, with the yen-dollar exchange rate exceeding 150 yen this year, news of Japanese companies acquiring overseas firms continues. Renesas Electronics recently agreed to acquire Altim, a U.S. software company listed on the Australian stock exchange, for 9.1 billion Australian dollars. Sekisui House expanded its business area by acquiring U.S. construction company MDC Holdings for $4.9 billion.

Jeff Acton, partner at boutique investment bank BDA Partners in Tokyo, said, "We do not stop deals just because the yen is weak," adding, "It moves according to strategic growth priorities." He predicted that corporate sales and management buyouts would further promote more M&A this year.

Additionally, pressure from the government and investors on companies to strengthen growth is also a factor driving M&A. The telecommunications sector reported, "All of this is leading to a wave of M&A." Yoshihiko Yano, Head of M&A at Goldman Sachs Tokyo, recently diagnosed that Japanese life insurers and asset managers are demanding governance reforms together with activist shareholders, resulting in companies being more open to M&A. Kiyota said, "Global companies are increasingly receiving inquiries as they begin to review acquisition proposals more realistically."

According to data compiled by Bloomberg, Japan-related deals accounted for 22% of total Asian deal volume last year, the highest in four years. Peter Genthark, Head of Asia-Pacific Global Corporate and Investment Banking at Bank of America (BoA), predicted, "We will see more deal activity in Japan compared to other markets over the next two years."

Meanwhile, the Nikkei index, the representative stock index of the Japanese stock market, closed at a record high of 39,098.68, up 2.19% from the previous session. The rally is attributed to companies' solid earnings and the inflow of foreign capital due to yen weakness. Experts expect the Nikkei index to surpass 40,000 this year. BoA raised its year-end Nikkei index forecast from 38,500 to 41,000.