Corporate Takeovers in Japan: Embracing "Grafting"

Grafting and Bushido

• Despite the substantial amount of lip service being paid to the revitalizing role that could be played by mergers and acquisitions, the fact is that Japan remains a significantly under-developed market for public M&A activity. Year-on-year change rates are high but M&A as well as inward FDI are miniscule compared to other major OECD nations. Optimists will tell you this reflects significant upside potential for cross-border M&A.
• Japan’s cumulative FDI between 1994 and 2003 was lower than Poland’s, at $50.5 billion, and compared to cumulated FDI outflows of US$217.6 billion during the same period. Moreover, inward FDI in 2003 was roughly 1/10th that of China.
• While more attention has been paid to cross-border M&A into Japan, we however believe that M&A, once considered a "foreign" import by Japanese management, is now in the process of being "grafted" into Japanese business culture.