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The head of Japan's largest association of company leaders said the country had reached a “tipping point” of business transformation as a number of share-croppers forced companies to wake up from decades of slumber.
The comments of Takeshi Niinami, president of the Japanese beverage group Suntory and chairman of the influential Japan Association of Corporate Executives, come at the end of a year in which a record number of foreign and domestic activist funds bought a record number of stocks listed in Tokyo. .
Activist funds, such as Elliott Regime and ValueAct, have also been very bold in choosing their targets – a list that includes Japan's biggest property developer, Mitsui Fudosan, and automaker Nissan.
Under the pressure created by activist investors, the past year has also produced a sharp increase in the price of takeover bids – a strategy that has been treated as taboo, but is now approved by the government through changes in merger guidelines.
In an interview with the Financial Times, Niinami said the surgery went well activism and its impact on Japan's top management, it marked the end of the country's long-standing, deflationary and corporate inertia.
“The 30 years we lost are over, and we are facing a big tipping point. It will be good,” said Niinami, who predicted that activism, private equity deals and domestic mergers will continue to rise in 2025.
“It's a tipping point for Japan to be more efficient, more productive and more profitable,” said Niinami, who added that Japanese managers will now be forced to pay more attention to metrics that investors care about, such as the cost of capital. and return on equity.
The race was on, Niinami said, for chief executives to reorganize their companies before the activist told them to do so. I an unsolicited request for Seven & i it is Alimentation Couche-Tard of Canada that has nailed the ropes, he said.
“This message is very important to drive all CEOs to think about what is wrong with my company? If something is wrong, we have to fix it, otherwise we will have a lot of warning from the activists. “Sleeping companies will now wake up,” said Niinami.
In addition to an unsolicited $38 billion bid by ACT for Japan's largest utility operator, deals in 2024 include Nidec's attempted $1.6bn “takeover” of Makino Milling and a tug of war between private equity giants KKR and Bain over a group of IT services. Fuji Soft.
Nicholas Smith, Japan expert at CLSA Securities, said Japan it was already the second largest global market for private equity and activism. Japan hosts two-thirds of Asia's activist events, he said, and is growing.
“All over the world, value investors and event traders are watching Seven and I trade intently as a potential place for Japan's rapid turnaround in the corporate governance market,” Smith said.
But the Japanese stock market's turnaround, warned investment bankers and other deal advisers, should be viewed as a fragile system. Jeremy White, an M&A partner at law firm Morrison Foerster in Tokyo, said the number of shareholder disputes or unsolicited bid stories could decline by 2025.
“I think that would indicate that there is enough friction in the market to stop what looks like a direction to go. I think what we have right now is momentum going in one direction: that doesn't want to reverse, just putting the brakes on would be bad enough,” White said.