2017 deals: Japan Inc to prevail?

TOKYO/SINGAPORE: Japan Inc may become a more important force in dealmaking next year as its cashedup companies seek to buy growth prospects elsewhere in the world and as Beijing’s crackdown on capital outflows prevents some Chinese companies from making foreign acquisitions, bankers and lawyers said.

Facing tepid prospects at home after decades of stagnation amid a shrinking population, Japanese companies had spent US$93 billion (RM417 billion) overseas this year, up to December 19, little changed from a record US$96 billion in all of 2015, but up from just US$51 billion in 2013, Thomson Reuters data shows. Chinese companies have spent US$217 billion so far this year.

With Japanese firms hoarding a record US$3.2 trillion in cash, outbound acquisitions are expected to maintain a fast pace next year, the bank and law firm sources said.

And while the recent weakening of the yen against the dollar will make American acquisitions more expensive in yen terms, it does mean that Japanese companies will tend to be earning more of the yen from overseas assets.

Among recent deals, Asahi Group Holdings this month beat rivals, including China Resources, to buy Anheuser-Busch InBev’s eastern European beer brands for US$7.6 billion.

“Japanese buyers have a low cost of capital, strong cash balances and a strong appetite to diversify out of their home market,” said Mayooran Elalingam, Deutsche Bank’s head of Asia-Pacific M&A. “At the same time, they do not have the regulatory or political constraints of a Chinese purchaser.”

Japan’s cashed-up insurers are likely to step up their aggressive hunt for overseas businesses, the bankers said. Reuters