I receive quite a lot of enquiries from companies in China who want to acquire businesses in Japan. It usually goes like this:
“We are interested in buying quality companies in Japan, with unique knowhow, good revenue track record and profitability. Can you let me know if you have available targets? “
“What industry? “
“TMT, Healthcare or High-tech.”
Sure, there are many companies in China that have a lot of money. But there is a lot of money floating around in Japan too. Last week I visited a friend in Tokyo who has just set up a fund to do exactly that: acquire good quality companies in Japan.
When a company is for sale, the seller’s advisor will want to solicit a number buyers to bid up the price. If the company is any good, it should easily attract a large number of indication of interest from within Japan. After all, deal information rather readily circulate among professionals (in Japanese language only, of course).
The sell-side advisor will then select the top two or three that have the best synergy story for further negotiation. Surely the ones with good potential synergy can afford the highest bid price.
Good companies available for sell are always a rarity. It is a seller’s market.
So if deals do end up reaching you across the ocean, they may be of inferior quality, or you may already be in the game too late.
If you do have a strategic need to acquire or JV with a Japanese company, the good thing to do is to start actively reaching out to targets. You will want to do it anonymously, via a third party, so that no one will lose face if the other side thought the proposition was a laugh. Obviously, this needs to be done very skillfully, too, according to local etiquette.
These target companies may not even be thinking about selling. But through the process, you can develop rapport, and sell them your proposed synergy. When they do decide to sell some or all of their equity, they may still want to engage a professional advisor, who will advise them to compare other potential bidders. But you will already have developed a strong relationship. Japanese people always prefer to work with someone they already know. Hopefully your team will already have spent many nights wining and dining with their team.
To start the process, you will need to define what exactly you want, for example, “companies that design and manufacture weight-balancing sensors for humanoid robots” – not “TMT, Healthcare or High-tech”.
Money is needed, but money alone can’t buy rarity items, such as quality companies and True Love.
Strategic thinking and dedicated effort will be required.