M&A

Japan’s Nippon Express acquires Austrian logistics company Cargo Partner

It has been confirmed that Nippon Express will acquire Austria’s Cargo-Partner (subject to regulatory approvals) for around $743m, according to the Nikkei. For Nippon Express, this is their biggest acquisition ever, and yet another Japanese corporate originated M&A drive for international diversification and growth, in reaction to Japan’s ageing and shrinking economy.

Cargo-Partner has 4,000 employees in 40 countries including Europe, USA and Asia, and a turnover of over €2bn. Nippon Express’s turnover is around US$13bn, of which 6.4% is in Europe. Nippon Express has 73,350 employees in 49 countries, of whom 3,480 are in Europe. It is the only Japanese company to rank in the top 10 largest global freight forwarders. The combined entity will be the fifth largest air cargo carrier in the world.

The acquisition of Cargo-Partner will particularly expand Nippon Express’s presence in Central and Eastern Europe. Rival NYK Group, which includes Yusen Logistics, is actually larger than Nippon Express in Europe, with 8,360 employees based in the region out of 35,165 globally, 25% of its employees. The total number of NYK Group employees in EMEA grew over 1,000 in the past three years, particularly in countries such as Romania. Nippon Express clearly felt it was underweight in the EMEA region for some time, and has recently expanded its network here to include Slovakia, Serbia, Morocco and Kenya.

The founder of Cargo-Partner Stefan Krauter will stay on to help with the transition, sitting on the Corporate Supervisory Board and as an advisor to the Corporate Executive Board. He says he “will be focusing on smart partial integration with the new owners as well as on other matters regarding strategy, M&A and ESG.” I am not sure what “smart partial integration” means, but if it’s anything to do with integrating IT systems, unless Nippon Express is the exception to the rule in the Japanese corporate world, this will be prove to be a very long project, and it might even be worth binning any legacy Japanese systems for whatever Cargo-Partner already has.

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SEGA confirms it is acquiring Finnish Angry Birds company Rovio

SEGA is acquiring Finnish game maker Rovio for $775m/706m euros. The purpose of the acquisition isn’t so much to add elderly Angry Birds to their portfolio as to utilize Rovio’s live service expertise to bring current and new games to the mobile gaming market. It’s also about SEGA making sure it isn’t too dependent on its still successful but nonetheless rather 20th century cash cow, pachinko machines.

Rovio had around 546 employees of 58 different nationalities at the end of 2022. SEGA Sammy has around 1,300 employees in Europe, out of 7,760 globally, according to our estimates – in Bulgaria, France (SEGA acquired Endless series developer Amplitude in 2016), UK (acquisitions of Sports Interactive (2006), The Creative Assembly (2005) and Two Point Studios (2019)) – where the European companies SEGA Europe Ltd and SEGA Publishing Europe Ltd are also based.

SEGA Sammy Holdings are aiming to have 50% of their sales outside Japan by 2030. To that end, they have set a target of having 900 “culturally diverse” people in their Japan based workforce (around 21%) – which they define as being a foreign national, or having experience of living overseas, or a certain level of foreign language ability.

Toridoll expands restaurant business further in Europe

Tokyo listed food company Toridoll Holdings (owner of Marugame Udon + Wok to Walk) has acquired The Real Greek + Franco Manca owner Fulham Shore for £93 million. It acquired 40% of UK based Shoryu Ramen in 2016 and Netherlands based Wok to Walk in 2015.

Marugame Udon Europe’s headquarters is in the UK, employing around 100 people, with 11 restaurants. It has plans to open 150 restaurant outlets across Europe by 2027, creating 10,000 jobs.

Marugame Udon had 7 restaurants in Russia, operating as franchises, but these seem to have disappeared from its network.

Wok to Walk has restaurants in 12 European countries.

Nihon Nohyaku first acquisition in Europe

Nihon Nohyaku has acquired all shares of Interagro (UK) (13 employees), an agricultural materials manufacturer, through its UK subsidiary, Nichino Europe. The aim is to expand the business portfolio beyond synthetic agrochemicals, to become a leading company in life sciences.

Nichino Europe is Nihon Nohyaku’s only subsidiary in Europe, employing 20 people in Cambridge. It has other overseas subsidiaries in Korea, Vietnam, Colombia, Brazil, India, Taiwan, China and the USA.

Hitachi’s new risk management

Up until now, Hitachi’s risk management team was mainly centered on the legal department – which I suspect is probably the case in most Japanese companies. Now Hitachi’s President Keiji Kojima has added the finance department to it, wanting the company to take a more proactive approach to global risks. The aim is to visualize risks – such as the impact of the economic slowdown in Europe due to the Ukraine crisis and soaring component costs due to inflation – and respond quickly.

When Russia invaded Ukraine, GlobalLogic was empowered to act quickly to evacuate 7,200 local employees in the country – and was told that they could put off contacting Japan HQ until later. By the end of April, remote working and overseas bases had been put in place and the operations were back up to 95% level.

Hitachi’s overseas business has expanded recently thanks to the acquisition of US company GlobalLogic and the power grids business of ABB, now Hitachi Energy.

Strengthening the risk management system is one response to this, along with introducing a global standard job description system to the Japanese organisation, aiming to have 30% women and 30% non-Japanese representation ont he board by 2030, aiming for zero carbon by 2050. Five out of the 9 external directors are non-Japanese.

Hitachi has learnt from past failures in overseas expansion, such as the Horizon Nuclear Power project in the UK, and the failure of a joint venture thermal power project in South Africa.

These changes have impacted the way the board operates. Now, when an executive officer reports that a plan has not been achieved, the non-Japanese directors respond “so?” – by which they mean, don’t just report the result, tell me what you are going to do next. A former external director of Hitachi, Harufumi Mochizuki comments in the Nikkei that “thanks to training by foreign directors, the executive officers have acquired a world class management style, and the ability to action, with a sense of speed.”

The next challenge for Hitachi will be to make the best use of the global human resources that it now has thanks to its acquisitions. Only three of Hitachi’s 34 executive officers are non-Japanese. The Nikkei comments that these changes are very much in line with the vision of Mr Nakanishi, the former President and Chairman who died in 2021, for an organisation with world class leaders who can respond quickly to global risks.

Top 30 Japanese employers in the Netherlands 2022

While there is no doubt that Japanese companies have expanded at a very high rate these past few years in the Netherlands, measuring this in terms of numbers of employees or companies has become increasingly complex.

Partly this is due to the large proportion of potentially “brass plate” type Japanese companies, with no employees in the Netherlands – often the regional holding company for a group of companies. Partly it is due to the lack of disclosure – information on companies in the Netherlands does not seem to be as readily available as it is in the UK, where data on Companies House can be freely accessed. As a result, even when an employee figure is disclosed for a Japanese company in the Netherlands, it can sometimes turn out to be the employee total for the whole of the European or EMEA region. The Japanese Ministry of Foreign Affairs data also shows this in the large number of Japanese companies it labels “uncategorised.”

With those caveats in mind, we have attempted a Top 30 largest employers for the Netherlands (which can be downloaded for free below this post). If you would like a more detailed, company by company analysis, giving all 123 companies within the 30 corporate groups, and their size where available, this is available as a pdf for £9.99/€12. Please contact us for payment via PayPal.

Look out for the regional headquarters

The pdf also indicates whether a company is the regional headquarters. Whether you’re targetting Japanese companies as potential customers or employers, it is important to understand this, as the regional headquarters tend to be where the decision makers, big budgets and the most interesting career paths will be based. The number of Japanese expatriates in the country is also an indication of where the decision making influencers are. Although the Netherlands is only the 5th largest host of Japanese nationals in Europe, after the UK, Germany, France and Italy, this number has grown 41% since 2015.

Services is the growth sector

It’s also useful to know which sectors and companies are growing – for the Netherlands the main focus is services – financial services such as Orix (who acquired Dutch asset management company Robeco), logistics companies such as Yusen Logistics, in the NYK group, and recruitment and staffing companies – Outsourcing Inc and Recruit Holdings have both grown rapidly recently through acquisitions of Otto Workforce and USG People. Mitsubishi Corporation shot to near the top of the Top 30 with its acquisition of Dutch energy company ENECO in 2020.

Overall growth picture

As a result of this growth, we estimate there are now around 566 Japanese companies (excluding minority stake holdings and brass plates with no employees) in the Netherlands. The Ministry of Foreign Affairs data records 673 Japanese businesses (including joint ventures, equity stakes), an 86% increase on 2015.

The companies we have identified employ around 48,000 people, a 29% increase on 2017/8 – the vast majority (39,000) of whom work for the Top 30 employers in the Netherlands. Japanese companies in the UK, by comparison, employ around 170-180,000 people, and there has been a slight decline in numbers over the past 5 years.

Click the link below for a free pdf download of the Top 30 largest Japanese employers by company grouping in the Netherlands:

FREE PDF DOWNLOAD OF THE TOP 30 LARGEST JAPANESE EMPLOYERS IN THE NETHERLANDS

Pernille Rudlin gives evidence to the UK Trade and Business Commission on UK-Japan trade and business relationships

Pernille Rudlin gave evidence on the impact of the UK-Japan Comprehensive Economic Partnership agreement to the June 6th session of UK Trade and Business Commission.

It was interesting to discover that the trade statistics tracked by Dr Minako Morita-Jaeger, showing a decline in UK exports to Japan since around 2018, with particularly strong decline since 2020 in financial services match our observation that the number of people employed by Japanese companies in the UK has fallen, as have the numbers of Japanese companies and nationals in the UK from around the same time.

Japanese manufacturing in the UK – resilient, but not growing

Excluding automotive production, Japanese manufacturing operations in the UK have been relatively stable since 2015/6. Out of 200 or so companies, only a handful of companies have closed in the past five years, and much of this was to do with consolidating operations rather than withdrawing entirely from the UK. Many of the Japanese manufacturers date back to the 1970s, and the oldest established, YKK, has been manufacturing in the UK since 1966.

There have not been many new entrants either over the past five years – apart from Mechatronics (owned by JTEKT) and other “new” entrants which are the UK subsidiaries of American or Swiss operations acquired by Japanese companies such as Stolle (acquired by Toyo Seikan), Hitachi Energy (was ABB Power Grids) and Avista (acquired by Kurita)

Around two-thirds of the companies in this sector are the product of, or have conducted M&A in the UK. Japanese M&A activity across the UK and Europe has dwindled away in recent years, perhaps because of the difficulty of doing due diligence in a pandemic, or Brexit making acquisition of a UK manufacturing operation that may be part of an EU supply chain less attractive. There does not seem to be any particular trend to acquisitions in the UK, other than clusters of purchases in packaging, agrochemicals and food processing.

Notable recent acquisitions of UK companies include:

Hitachi Rail acquiring Perpetuum (2021)
Olympus acquiring medical device maker ARC Medical Design (2020)
Mitsubishi Heavy Industries acquiring the remaining stake in Primetals from Siemens, Hitachi and others (2019)
Sumitomo Heavy Industries acquiring Invertek Drives (2019)
Nippon Suisan acquiring Caistor Seafoods and Flatfish (2017-2019)
Rengo acquiring various packaging companies such as Tri-Wall and Welsh Boxes (2016-2020)
Agrovista (owned by Marubeni) acquiring various British agrochemical companies (2016-2019)
Sanwa acquiring Bolton Gate Services (2018)
Calbee acquiring Seabrook Crisps (2018)
Sansetsu (packaging) acquiring Truckwright (2018)
Sintokogio acquiring Omega (foundry machinery) (2018)
Konica Minolta acquiring Charterhouse and Indicia (printing) (2017-8)
Taiyo Nippon Sanso acquiring US company Praxair’s European gas business (2018)

Employment

Around 39,500 people were employed in the UK by non automotive Japanese manufacturers in 2015/6 and after a few years of growth to around 42,000, this fell to 39,167 in 2020/21. Judging by the results of the 60 or so companies who have reported for 2021/22, this downward trend is continuing. If automotive manufacturing employment is added back in, there were around 60,600 people employed in Japan-owned manufacturing in the UK in 2020/21, almost the same as were employed in 2015/6. As we explained elsewhere, this number is likely to fall in 2021/22 with the closure of Honda Swindon and other suppliers to Honda.

UK and Europe

How this compares with other European countries can be seen in the chart on the left – which shows the numbers of all manufacturing companies in Europe, including automotive. According to Toyo Keizai, the number of Japanese manufacturers in the UK dipped around 2017/8, but recovered, with another more recent fall. But there was growth overall since 2015/6, with 228 companies in 2021/2 compared to 215 in 2015/6 – a 6% increase. This is much lower than the overall 20% growth in Europe, and as a consequence the UK is no longer the largest host of Japanese manufacturers.

The number of Japanese manufacturers in Germany has grown 35%, and growth is continuing, widening the gap with the UK. France is a clear third, and is showing signs of growth tailing off. Netherlands, Turkey, Poland and Nordic countries are showing higher than average growth as hosts.

The growth of the number of Japanese manufacturing operations in Europe of 20% since 2015/6, from 1,147 to 1,381 companies was actually higher than the growth seen in Asia (7% to 9,047) or the USA (13% to 1,563). The number of Japanese manufacturing operations in Africa has grown 25% over the period – but from a much lower base of 57 to 71.

Japanese manufacturing in the UK “despite” Brexit has remained stable thanks to the resilience built up by those companies through being long established in the UK, benefitting from Japan HQ risk aversion and long term planning and having experienced, local management. These factors have not attracted the growth seen in other countries in Europe, however.

A directory of 205 Japan owned companies with production facilities in the UK, giving their full names, parent company, type of business and latest number of employees is available for £20 + VAT. Please contact us for an invoice and payment details via PayPal.

Trends in Japan owned financial services companies in the UK

Around 14,000 people worked for 85 Japan owned financial services companies in the UK in 2021. This is around 1,000 more people than in 2016, the year of the Brexit referendum. Although all the main banking, securities and insurance groups (Mizuho, MUFG, MS&AD, Nomura and SMFG) opened or strengthened EU entities as a Brexit countermeasure, it does not seem as if large numbers of jobs have shifted to those entities, or that there have been layoffs in the UK, and large scale hiring in the EU.

The surface calm does mask some restructuring, however, which are difficult to detect in the case of MUFG and Mizuho, as their banks in London are run as branches (of the Netherlands European HQ in MUFG’s case, and of Tokyo HQ in Mizuho’s case), and therefore do not have to publish company accounts with official employee figures. It was reported that MUFG offered 500 directors redundancy packages in 2019, but at the same time, subsidiaries such as Mitsubishi HC Capital and MUFG Securities have been growing substantially, with further employees added to the group through the acquisition of First Sentier Investments.

Rival banking group SMBC has incorporated its subsidiaries in the UK and its European headquarters is in London, so more accurate figures are available, which show employee numbers at the bank have grown by 45% to 1,246 from 2016 to 2021.

Nomura International on the other hand has 29% fewer employees in 2021 than it did in 2016, but a recent hiring spree has brought its London employee total back up to over 2,000 according to its annual report released in 2022. The Daiwa group has also grown, particularly on the corporate advisory side.

Recent growth in employee numbers has been more organic than through M&A. The only acquisition since MUFG acquired the Australian investment firm (with substantial presence in the UK) First Sentier in 2019 has been Orix acquiring Gravis Capital Management and SBI acquiring B2C2, a cryptocurrency firm employing 46 people.

Closures in the past 4 years include Finatext UK, Spitalgate Dealer Services (which was providing financing for Mitsubishi car dealers), Speedloan Finance – a pawnbrokers acquired by Daikokuya in 2015 and the branch offices of Okasan Securities and the Bank of Yokohama.

It may be that the apparent stability of Japanese companies in the UK was partly the result of a delay to relocations to the EU caused by the pandemic, and that further friction with the EU may lead to pressure being brought up on financial services companies to shift more of their business to the Continent. A further factor is the extent to which London is still seen as the place to learn about and develop the new business areas which Japanese financial services companies are investing in.

Examining the statistics from Japan’s Ministry of Finance on direct investment flows, it seems the UK benefitted from a big inward investment from Japan into the finance and insurance sector in 2016, then there was net disinvestment in 2017-2019, and then increasing net investment in 2020-21. Conversely, there was little investment into Ireland, Luxembourg or the Netherlands in 2016, but major investments into their finance and insurance sectors in 2017, 2018 and 2020-21.

A directory of 85 Japan owned financial services companies, giving their full names, parent company, type of business and latest number of employees is available for £10 + VAT. Please contact us for an invoice and payment details via PayPal.

Hitachi power shifts

The management changes announced at Hitachi, in effect from April 1st 2022, reveal changes in the balance of power, not only in Japan headquarters, but Europe. Alistair Dormer, a British executive, who had been CEO of Hitachi Rail, and then became the first non Japanese Executive Vice President of Hitachi, was seen as a rival candidate to fellow EVP Tokunaga Toshiaki, to become President of Hitachi. In 2021, Dormer, resident in Japan, became Chief Environmental Officer and also Chair of Hitachi Europe, both perhaps an indication that he was sliding sideways away from the Presidency.

It now transpires that Dormer has retired from all his positions at Hitachi, apart from Chair of Hitachi Europe and will return to the UK. Kojima Keiji, who was already President, has strengthened his position by becoming CEO as well, following the current CEO, Higashihara Toshiaki, stepping down from the CEO position, but continuing as Chairman.

Kojima reorganised Hitachi from 5 divisions into three, focusing on “digital” systems and services and “green” energy and mobility as growth engines. “Green” was headed by Dormer but will now be directly managed by Kojima. Tokunaga, who spent some time in Silicon Valley, is heading up the “digital” side and is still seen as the hot favourite to succeed Kojima as President. He is quite literally Hitachi born and bred, having been born in Hitachi city, and his father also worked for Hitachi. He is only 55, which would make him the youngest President if he succeeds Kojima in the next few years. Kojima is ten years older than Tokunaga and became President in 2021. Previous presidents Higashihara and Nakanishi were in post for 7 and 4 years resepctively.

All is not lost in terms of having the first ever non-Japanese president of Hitachi, however. A possible successor to Tokunaga, if he is willing to wait that long, could be Claudio Facchin, who joined Hitachi in 2019 as a result of Hitachi’s acquisition of ABB Power Grids in 2020 and is now an executive officer and Senior Vice President of Hitachi, as well as CEO of Hitachi Energy.

The acquisition of ABB Power Grids led to a second shift in the balance of power within Europe. The acquisition resulted in around 15,000 employees joining Hitachi in the Europe, Middle East and Africa region, but did not have so much of an impact on HItachi’s presence in the UK, where its European headquarters is based.

In 2018-9 most of Hitachi’s EMEA staff were in the UK, working for Hitachi Rail and Hitachi Capital but now less than a third are working there.

A further acquisition, of Globallogic, in July 2021, is likely to shift the balance further. Even though it is an American IT company, it has a substantial number of employees in Eastern Europe, including Poland and several thousand who were until recently in Ukraine.

Last updated by Pernille Rudlin at 2023-05-17.

M&A

Category: M&A