The incoming Trump administration is expected to ease the approval process for Japanese companies seeking to acquire US businesses, according to Citigroup’s vice chairman in Japan. This anticipated shift comes despite President-elect Trump’s opposition to Nippon Steel’s bid for U.S. Steel. Citi anticipates this regulatory change, coupled with potential business reorganizations under Trump, will create a wealth of acquisition opportunities for Japanese firms.
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Relaxed Regulations to Fuel Japanese Investment
While the proposed $15 billion acquisition of U.S. Steel by Nippon Steel faces significant hurdles, including opposition from both Trump and current President Biden, experts believe the overall regulatory environment will become more favorable for Japanese investors. This relaxation of rules could unlock significant opportunities for Japanese companies, who are already the largest foreign investors in the US.
Anticipated Rise in Outbound M&A Activity
Citi’s head of M&A, Yoshinobu Agu, noted that the firm expects a surge in inquiries from Japanese companies seeking outbound M&A opportunities. The anticipated shift away from the stricter Biden-era merger review guidelines, perceived as overly restrictive by dealmakers, is seen as a catalyst for this growth. This change could provide a significant advantage for Japanese firms looking to expand their presence in the US market. Historically, many US companies have been hesitant to pursue deals due to the stringent FTC regulations.
Inbound M&A Market in Japan Also Expected to Thrive
In addition to outbound activity, Japan’s inbound M&A market is also experiencing a period of robust growth. Despite a global slowdown in dealmaking, inbound M&A in Japan reached a record $82 billion by the end of November, a tenfold increase year-over-year. This surge is attributed to new M&A guidelines introduced last year and increased pressure from institutional investors for greater capital efficiency.
Restructuring to Create Acquisition Targets
Experts predict that Japanese companies will increasingly reorganize their businesses to enhance shareholder value and profitability. This restructuring process is expected to generate a greater number of attractive and readily acquirable targets for both domestic and international buyers. The shedding of non-core assets and streamlining operations will make Japanese firms more appealing acquisition prospects.
Conclusion: A New Era for Japanese M&A
The convergence of relaxed regulations in the US, a vibrant inbound M&A market in Japan, and the ongoing restructuring of Japanese businesses points to a significant increase in cross-border acquisition activity. This new era presents substantial opportunities for Japanese companies seeking growth and expansion in the US market and globally. Japanese firms are well-positioned to capitalize on this evolving landscape, leveraging their financial strength and strategic vision to drive future growth.
