M&A

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.

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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.

France as a global brand manager

Nippon Paint Holding’s November 2021 acquisition of French company Cromology initially caused me some confusion. The acquisition was done via Nippon Paint’s consolidated subsidiary, the Australia based DuluxGroup and their newly established UK based company DGL International UK Ltd. To most British people, Dulux is a British consumer brand, famous for using an Old English Sheepdog in its marketing since the 1960s. Because this breed of sheepdog has been used in the Dulux commercials and on its paint tins for so long, it is even known as the Dulux Dog.

It turns out that the Dulux Dog was also used for advertising Dulux paints in Australia, but Dulux in the UK and Dulux in Australia are now owned by separate companies. Dulux brand paints first appeared in the UK the 1930s, developed by the British company ICI, with the brand name being a combination of “Durable” and “Luxury”. By 1986, ICI Australia had 100% ownership of Dulux Australia but ICI plc then sold off ICI Australia in 1997.

In 2008 the Dutch company AkzoNobel acquired ICI, whereas the DuluxGroup listed on the Australian stock market as an independent company in 2010 and acquired various Australian, British and French paint companies and brands since then.

Cromology is Europe’s fourth largest architectural paints manufacturer with 20 paint brands that it sells across Italy, Spain, Portugal and France. Nippon Paint is apparently seeing its acquisition as a way of expanding its various brands, including Dulux, into Central and Eastern Europe too.

Up until recently France has not been as big a base for Japanese companies to expand regionally as the UK or Germany. But this acquisition by Nippon Paint and also the acquisition of French company CFAO by Toyota Tsusho and French multinational Leroy-Somer by Nidec in 2016 makes me wonder whether this might be changing.

CFAO is rather similar to Japan’s trading companies, with a history stretching back nearly 170 years, and has a substantial presence in 39 African countries, including what is sometimes known as Francophone Africa, as well as other former French colonies such as Vietnam. It has over 21,000 employees worldwide and as well as distributing Toyota vehicles, it also has brewing, pharmaceutical, retail and car servicing businesses

France has a long experience of managing famous brands globally, but as I have mentioned before in this column, multinationals are often reluctant to invest in a country that is costly to do business in, with poor labour relations and a complex bureaucracy. French President Emmanuel Macron has been trying to reform labour laws, extend the retirement age and make pensions less costly, but this has been stalled by the pandemic, and the need to maintain his popularity until he seeks a second term as President in April next year. It will not be until later in 2022 that we will see if France is in the mood to redecorate its house.

This article was originally published in Japanese in the Teikoku Databank News on 8th December 2021

Top 30 Japanese Employers in the Netherlands 2021

There’s no doubt the Netherlands has done well from Brexit in terms of Japanese investment into Europe. Its strong services sector has made it a useful alternative regional coordination hub to London and there is a longstanding thriving Japanese community in the Amsterdam area. Both the numbers of Japanese nationals living in the Netherlands and the numbers of Japanese companies in the Netherlands have shot up the past few years, in contrast to a clear decline in Japanese companies in the UK, and a rather more bumpy but downward trend in Japanese nationals in the UK. There have also been some significant acquisitions of Dutch companies by Japanese companies since 2016.

The number of Japanese companies in Germany, the largest host in Europe, has also grown steadily over the past few years, making the sudden rise in Japanese companies in the Netherlands and Italy in the past two years look somewhat anomalous. The Ministry of Foreign Affairs (MoFA) does not explain what caused this sudden leap but they are sticking to their guns with the recent release of the data for 2020.

Cross referencing the MoFA data with the Toyo Keizai directory and our own desk research, we think the sudden jump in the number of Japanese companies in the Netherlands and Italy are probably to do with the recent acquisitions – perhaps Outsourcing acquiring Netherlands headquartered Otto Work Force in 2018, supplemented by Mitsubishi Corporation acquiring Dutch energy company ENECO in 2020. In the case of Italy, it could be due to Hitachi acquiring various companies from Ansaldo STS.

Our database contains 352 Japanese companies in Italy, sitting neatly betwen the 415 registered by MoFA and the 269 recorded in the Toyo Keizai directory. But our estimate of 503 Japanese companies in the Netherlands is lower than both the 525 in the Toyo Keizai and the 639 in MoFA’s records. We only enter companies which we can verify have employees into our database, which is why we appear to have under-recorded the number. Many of the companies identified by Toyo Keizai and presumably MoFA are brass plate, holding company type entities. As was seen in the acquisition of Otto Work Force, even one company in the Netherlands turns out to have multiple legal entities attached to it – at least 9 different subsidiaries are associated with Otto Work Force in the Netherlands. According to Dun & Bradstreet, Outsourcing’s holding company in the Netherlands now has over 50 companies associated with it.

Some of the Netherlands based companies we have not recorded may well have employees, but it seems Dutch companies are not obliged to disclose as much information as similar companies in the UK, for example – where employee numbers, even for the smallest company, are disclosed and freely available on Companies House.

Bearing the lack of data in mind, our Top 30 Japanese companies in the Netherlands needs to be treated with caution, but we can certainly see that Outsourcing and Mitsubishi Corporation‘s recent acquisitions have pushed them into the Top 30. Recruit, another major Japanese recruitment company, also entered the Top 30 with its acquisition of USG People in 2015 and Orix, the Japanese financial services company, acquired Dutch asset manager Robeco in 2013.

As these acquisitions show, Japanese companies have mainly been investing in the Netherlands’ services sector. There are some companies with manufacturing operations such as Omron, making control equipment, factory automation systems, electronic components, automotive electronics, ticket vending machines and medical equipment. Toyota Industries entered the Top 30 with its acquisition of materials handling systems manufacturer Vanderlande in 2017 and Canon manufactures printing production systems, as one of its legacies of acquring Oce more than ten years ago. Other major manufacturers are Astellas (pharmaceuticals) and Teijin (fiber). The notable absences from the Top 30 in terms of manufacturing are from the automotive sector – no Japanese car companies have plants in the Netherlands, and as a consequence, none of their suppliers do either.

The 30,000 employees who work for the Top 30 largest Japanese employers in the Netherlands represent around 70% of the total number of Netherlands based employees working in Japanese companies. This puts the Netherlands in equal 7th place with the Czech Republic in terms of largest numbers of employees in Europe, after Germany, UK, France, Poland, Italy and Spain. As the Netherlands is host to the fifth largest number of Japanese nationals and fourth largest number of Japanese companies, this is a further indication that the Netherlands has relatively few manufacturers with large numbers of employees and rather more in the way of holding companies with no employees, and a relatively higher density of Japanese expatriates compared to some other European countries.

See our 2022 top 30 Japanese employers for the Netherlands for updates.

Top 30 Japanese employers in France 2021

It’s been 4 years since we last looked at the top 30 Japanese employers in France. Much of what was true four years’ ago is true today. The top 30 partly reflects France’s traditional strengths, at least in Japanese minds, of food and drink, fashion, beauty and imaging technology – with Ajinomoto and Suntory still in the top 30 along with Shiseido, Fast Retailing (Uniqlo, Princesse Tam Tam and Comptoir des Cotonniers), Canon, Ricoh, Toshiba and Konica Minolta.

The automotive sector is still a big employer, as you might expect with Toyota having a plant in Onnaing making the Yaris, and Nissan having some of its models made by Renault, supplied by NTN, JTEKT and Nidec.

Some of the new entries are in the pharmaceuticals sector, including Taisho Pharma, who acquired UPSA from Bristol Myers Squibb in 2018 and Otsuka who have grown and made several acquisitions since they bought Nutrition et Santé in 2009.

SoftBank is still in the Top 30 as they have a substantial number of employees via ARM, which they still have not managed to get approval to sell. They have also said they are cutting half of the staff in France who were working on robotics, including the not very popular Pepper, brought in with their acquisition of Aldebaran in 2012 and may be planning to sell it to a German company.

According to our estimates, France is still the third largest base for Japanese company employees in the European region, with 76,000 employees. This is still less than half the employees of Japanese companies in the UK (176,000) or Germany (167,000) however. Around 60% of these employees are working for the top 30 largest Japanese employers (see below).

The largest employer is Toyota Tsusho, (the trading sister company to Toyota Motor) who shot to the top of the rankings after their acquisition of French company (with a major presence in Africa), CFAO in 2016. Nidec have also become a substantial presence in France thanks to their acquisition of Leroy-Somer, also in 2016.

The most recent acquisition in France by a Japanese company is Nippon Paint‘s acquisition of Cromology, Europe’s fourth largest architectural paints manufacturer. The acquisition was done via a new UK based company, DGL International, which is in turn owned by the DuluxGroup, an Australian paints company acquired by Nippon Paint in 2019. Nippon Paint sees this acquisition as a way of accessing markets across Europe, particularly France, Spain, Italy and Portugal, and then into Central European countries.

Up until now France has hosted far fewer regional headquarter companies than the UK or Germany. Perhaps these recent acquisitions show the start of a trend towards France becoming a base for Japanese companies to expand into the wider EMEA region.

Update:

We have received some more recent data regarding Hitachi’s employee numbers in France, following their acquisition of ABB Power Grids and JR Automation and other growth, so have updated the Top 30 for France accordingly. We welcome such updates so please do get in touch if you think we are missing something.

You can download the (updated) Top 30 Japanese employers in France below:

FREE PDF DOWNLOAD OF TOP 30 JAPANESE EMPLOYERS IN FRANCE 2021

Overseas acquisitions by Japanese companies are not to be feared

A record number of British companies have been sold to overseas buyers in the past two months, according to a report from Refinitiv, a subsidiary of the London Stock Exchange. The targets have mostly been undervalued services companies in sectors such as insurance, gambling and security. These acquisitions have been described more as a corporate raid than a positive investment, as many were carried out by private equity firms and also what are known as Special Purchase Acquisition Companies, or Spacs.

Special Purchase Acquisition Companies originated in the USA. A group of investors set up a company, raise money on a stock market, and then look for something to acquire, with the intention of then selling it off at a profit. The City of London is currently discussing whether or not to make itself even more attractive to such companies.

This could end up as just another form of asset stripping, similar to what in Japan would be called Vulture Funds.

Japanese companies have also started acquiring British and European companies again, after a year when it was difficult to do the required due diligence because of the pandemic. Renesas is looking to acquire the UK-German chip design company Dialog, Nishimoto has just announced the acquisition of Sco-Fro, a Scottish importer of frozen fish and noodles and Ricoh has unveiled its 5 year plan, including funds to acquire companies in Europe.

These acquisitions are very different to those carried out by private equity or Spacs of course. According to my research, British companies that have been acquired by Japanese companies over the past five years have, on average, expanded their employee numbers by somewhere between 10 to 25%. Japanese companies try to pick companies that will support their profitable growth overseas. They are also willing to invest in new equipment and other forms of expansion, such as further acquisitions.

The recently announced UK budget provides further incentive for capital investment – a two-year tax break allowing companies to deduct 130% of their investment from their taxable income. This is to cushion the blow of corporation tax rising from 19% to 25% in 2023. Cynics suspect that the timing of this is to coincide with a possible election in 2023, and if the economy has sufficiently recovered, tax cuts will be announced for the future.

In any case, for Japanese companies, low corporate tax rates are not the primary attraction, particularly given Japan’s revised tax haven laws. They should be welcome investors in the UK and the rest of Europe – so long as they remember to communicate that they are looking to grow and invest for the long term, rather than seeking short term profits from restructuring.

This article originally appeared in Japanese in the Teikoku Databank News in April 2021.

Rudlin Consulting and Japan Intercultural Consulting have worked with many Japanese and European companies on post merger integration and corporate culture – please contact Pernille Rudlin for further details.

M&A

Category: M&A