Business leaders find Japan M & A rules ‘stifling’

Most senior Japanese business people think the country’s rules on mergers and acquisitions are damping M&A activity, according to a survey being published on Wednesday.

Three quarters of 100 senior decision-makers surveyed by mergermarket, an M&A information company, think M&A rules are “too stringent and [are] stifling legitimate business”. The survey reports that 19 out of 20 respondents said Japanese M&A regulations were “vague and detrimentally affect M&A activity”.

Mergermarket’s survey included corporate executives, bankers and lawyers. The interviews were all conducted in Japanese, suggesting the bulk were Japanese people rather than westerners, though the company did not disclose details.

Six out of 10 said the domestic regulatory environment was either the “most serious” or a “very serious obstacle” to M&A in Japan.

Ernst & Young, which sponsored the report, said legal changes had made the acquisition of Japanese companies “somewhat more straightforward”. New accounting standards, for example, had made it easier to see which businesses “are the most attractive acquisition targets”.

But lobby groups representing foreign companies have criticised recent government moves to make it more difficult for foreign companies to acquire a Japanese company using their own shares.

The government liberalised these so-called triangular mergers for domestic companies in May, but delayed extending the opening to foreign companies for a year over fears of an invasion of foreign capital.

The Keidanren, Japan’s main business lobby group, has been pushing fiercely to make foreign-initiated triangular mergers harder.

The Ministry of Economy, Trade and Industry has proposed a watered-down version that critics say will make triangular mergers unusable for new foreign investors.

In spite of the obstacles, more than six in 10 respondents said they expected incoming cross-broader M&A to increase in Japan next year, and a similar number expected domestic M&A to rise.

Business services was expected to be the most buoyant area for M&A next year.

The value of M&A deals in Japan has grown over the past few years, though this year’s total is on track merely to match last year’s.

Many economists say that M&A boosts countries’ productivity by introducing innovations in manufacturing and services. However, some Japanese executives argue that foreign acquirers of Japanese companies are too eager to destroy jobs.

Mergermarket is owned by Pearson, which also owns the Financial Times.

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