Thomson Reuter’s data shows a 63% decline in the value of Japanese M&A overseas and a 33% drop in the number of deals in the first quarter of 2013 compared to the previous year, presumed to be because of the slide in the Yen, although it could be that most of the major deals have been done. However the Nikkei’s survey shows the intention to acquire overseas is still strong(ish), with 42.6% of 146 leading Japanese companies saying they want to buy other firms (Japanese and overseas) with North America and Europe being the most preferred takeover destination.
Overseas expansion is not just about acquisition of course – a third say they want to increase production abroad. Mitsubishi Heavy Industries ($35bn engineering multinational) has announced that it intends to increase by 60% the 15% of its production that is overseas. Over half of its sales are overseas, so this does imply downsizing domestic production, even though MHI maintains it will preserve domestic jobs and technology with its earnings from abroad. It has announced a transfer of technology and expertise to Indian partners, and has also embarked on some acquisitions – such as buying the gas turbine unit of Pratt & Whitney – and has declared its intention to acquire more.
On the other hand, Japanese companies have a habit of shaming executives responsible for aggressive overseas expansion if it is perceived as having gone wrong, and their timescales are quite short for making this judgement. See Shiseido, Nomura, and now Nippon Sheet Glass are sidelining the two executives who were responsible for the Pilkington Glass acquisition. This will make Japanese executives hesitate before hitting “play”.
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