According to the Zhitong Financial APP, Japanese trading intermediaries expect that due to changes in corporate attitudes toward business expansion, last year's merger and acquisition volume in Japan exceeded 230 billion dollars, and it will be even busier in 2025.

After decades of economic stagnation, Japanese companies are becoming more proactive to fend off global competitors and aggressive investors.

Some companies are choosing to expand quickly through high-profile global acquisitions—Nippon Steel even sued US officials to finalize a deal. Other companies, including Honda Motor, are considering some previously unthinkable options: merging with rivals or teaming up with private equity funds for acquisitions.

Satoshi Shimada, head of JPMorgan's Japan merger and acquisition business, stated: "We are in a very different era. In the past 12 to 24 months, the necessity of considering offers and being prepared to respond to them has become very real."

The shift in corporate mindset is evident. Traders indicate that Japanese companies used to prefer meeting with private equity funds in hotels rather than offices to avoid the embarrassment of being seen with such investors. For bankers, the idea of 'selling the company' as an option in Japan was unimaginable. Now, companies are beginning to accept all options.

Renewed interest from activist investors.

The pressure from activist hedge funds is one source of urgency. Activist investors have renewed interest in Japanese companies, with investors like Elliott Investment Management and ValueAct Capital Partners being more aggressive in Japan, seeking to profit from companies with undervalued stocks and high operational quality.

Such Funds have traditionally been viewed cautiously, but now they have the support of Japan's Ministry of Economy, Trade and Industry, while institutions like the Tokyo Stock Exchange are also promoting a greater focus on shareholder returns among Japanese companies.

According to data compiled by Bloomberg, Japan was the second busiest market for activist investment last year, with approximately 150 rights protection activities, nearly a 50% increase compared to 2023. Meanwhile, Japan's stock market is expected to reach a historical high in 2025.

The rise of activist investors in Japan.

Kenichi Sekiguchi, a partner in the merger and acquisition practice at Mori Hamada & Matsumoto, stated, 'We are advising companies under pressure from activist shareholders that are seriously considering privatization or business integration with other Japanese companies.'

Sekiguchi stated that his team has had a large volume of trades this year, expecting to announce several transactions worth hundreds of millions to billions of dollars in the first half of the year.

According to data compiled by Bloomberg, the value of merger and acquisition deals involving Japanese companies increased by 44% in 2024, reaching over $230 billion. This is the fastest growth since 2018, while merger and acquisition activity across the Asia-Pacific region grew by 38%.

At the beginning of the new year, a series of significant transactions reflect the renewed vigor of Japanese companies. Seven & i Holdings Co., the operator of 7-11, is potentially being pursued for a management buyout at 9 trillion yen (approximately $57 billion), as the founding family of the company attempts to counter an acquisition offer from Alimentation Couche-Tard Inc.

Honda Motor and Nissan formally announced their intention to cooperate at the end of last year, which could create the world's third-largest auto manufacturer. KKR & Co. and Bain Capital are competing to acquire Fujifilm Holdings Corporation Unsponsored ADR for over $4 billion, which is a rare initiative by Bain Capital in Japan.The number of hostile takeovers is diversifying.。

In 2024, private equity firms with a background in China became more active in Japan. Hillhouse Capital Management announced a bid to acquire the real estate company Samty Holdings. Fengyuan Capital and the Japanese Fund Unison Capital collaborated to acquire the Japanese jeweler Tasaki & Co. from MBK Partners for approximately 100 billion yen.

Jeff Acton, a partner at the Tokyo boutique investment bank BDA Partners Inc., stated, 'We have seen a significant increase in the number of investors and buyers.' Acton mentioned that he recently meets with new investors and funds wishing to enter this market two to three times a week. 'Five years ago, there were no meetings at all.'

The rise of acquisitions and privatizations.

Tetsuro Onitsuka, a partner at Swedish acquisition company EQT AB in Tokyo, stated that some companies view privatization as a more acceptable option than becoming subsidiaries of competitors.

Onitsuka said: "Our sales channels have performed well this year, partly due to this industry-driven pressure. Japan cannot change overnight to become like the USA, but people's mindsets have shifted, which has brought us opportunities."

Takaomi Tomioka, co-head of The Carlyle Group Japan, stated that The Carlyle Group completed the deployment of its fourth Japan-focused fund in about 3.5 years, ahead of the usual five years. The fifth Japan fund completed fundraising last May, raising 430 billion yen, the largest Japan-focused acquisition fund in history.

Tomioka stated: "The number of acquisition opportunities has significantly increased." He expects to allocate about 100 billion yen from its newly established Japan fund this year, primarily for privatizations and spin-off deals.

Despite the vigorous domestic acquisition activities in Japan, companies continue to pursue overseas acquisitions actively, a trend that has persisted for years.

Deal brokers noted that unfavorable factors, such as the weakening yen and the hindrance of Nippon Steel's acquisition of United States Steel, might initially deter some companies, but are unlikely to affect the overall trend of Japanese enterprises engaging in more overseas transactions.

The total cash holdings of Japanese companies remain near historical highs, thanks to some large companies easing cross-shareholdings. In July of last year, Toyota Motor announced plans to repurchase stocks worth 806.8 billion yen held by companies such as Mitsubishi UFJ Financial Group and Tokio Marine Holdings. Bankers indicated that this cash now needs to be used for overseas mergers and acquisitions.

Japanese companies' cash reserves are at a historical high.

Considering the declining population trend in Japan, industries such as Consumer and Insurance may be the most active in overseas Trade.

Ken LeBrun, a partner at Davis Wright Tremaine LLP in Tokyo, stated: “In the coming year, we will see a large number of overseas Trades worth tens of billions of dollars. With ample Cash, Japanese Banks are also engaging in lending activities. For many Japanese companies, large Trades are necessary to create the required impact on their Business.”