M&A hits record in Japan as funds shake deals loose

A record number of Japanese mergers and acquisitions were signed during the first half of 2006, with the ever-expanding role played by private equity firms expected to shake more cross-border deals loose in the months to come.
Japanese firms are still haunted by memories of failed expeditions abroad during the bubble years of the nation's economy, so some may seek partners among the international private equity firms recently set-up in Tokyo to help finesse international deals.

"The cultural gap has handicapped Japanese firms historically, they may be able to co-invest with a financial buyer and work together to develop management," said Takamitsu Araki, head of the Corporate Advisory Division at Japan's Shinsei Bank during a conference organised by The Economist publication.
Typical problems the Japanese face when acquiring foreign firms are different negotiating styles and language barriers. Both of these were experienced by Tomoaki Abe, vice-chairman of Nippon Sheet Glass Co Ltd when his company bought British glassmaker Pilkington.
"Our biggest lesson was we should not underestimate cultural differences," he said.
The number of announced Japanese mergers and acquisitions rose 5.8 percent to a record 1,533 in the first six months of 2006, up from 1,449 a year ago, said data providers Thomson Financial.
This year saw the biggest-ever leveraged buyout in Japan, Softbank Corp's $17.5 billion acquisition of Vodafone Group's Japan unit, Thomson Financial said. Private equity participated in 39 of those M&A deals, their biggest involvement ever, according to another data provider Dealogic. At least two private equity firms tried to trump Softbank's offer for Vodafone's unit.
Private equity firm CVC Capital Partners was part of the consortium which led the $3.1 billion Skylark Co buyout this year, the largest management buyout in Japanese history, Thomson Financial said.
Conversely, cross border acquisitions by Japanese companies hit a six-year high of $14.3 billion from 163 deals - a 138.8 percent increase from $6 billion a year ago.