Even the Weak Yen Can't Stop It... Japanese Companies Eyeing Acquisition of US Assets

Despite the Yen's Decline,
Seeking US Companies and Assets with Ample Cash Reserves

Major Japanese real estate developers and financial companies are eyeing acquisitions of U.S. assets. Despite the depreciation of the yen, Japanese companies, backed by abundant cash reserves, are actively pursuing mergers and acquisitions (M&A) and asset purchases in the United States.

[Image source=Yonhap News]

According to major foreign media on the 11th (local time), Japanese real estate company Mori Trust purchased a 49% stake in the 245 Park Avenue Tower in Manhattan, New York, last month for $2 billion. The building's purchase price slightly decreased from the $2.2 billion paid by China's HNA Group in 2017. Due to rising vacancy rates in commercial real estate causing significant price drops, the market interpreted this as a signal that prices are nearing the bottom.

Japanese financial firms are also actively acquiring stakes in U.S. companies. Mizuho Financial Group acquired the U.S. investment bank Greenhill for $550 million in May this year. A month earlier, in April, Sumitomo Mitsui Financial Group expanded its stake in the U.S. investment bank Jefferies to 15% and announced a focus on the M&A business. Foreign media analyzed these moves as attempts to replicate the successful case of Mitsubishi UFJ Financial Group (MUFG) during the 2008 global financial crisis. At that time, Mitsubishi UFJ purchased a 21% stake in Morgan Stanley at a bargain price amid the turmoil of the global financial crisis.

The main reasons Japanese companies are turning their attention to overseas M&A include abundant cash liquidity and low valuations of acquisition targets and companies due to economic slowdown. In particular, from the perspective of Japanese financial companies, interest income has decreased due to the central bank's ultra-low interest rate policy, and companies accumulating internal reserves are reducing their reliance on loans, making the domestic market increasingly a red ocean.

While foreign companies are lined up to buy Japanese assets and companies at bargain prices due to the weak yen, Japanese companies are looking to expand their business territories overseas, which has drawn attention to recent movements.

Ken LeBrun, Senior M&A Partner at major law firm Davis Polk, said, "Everyone knows that the low metabolism and poor investment returns of Japanese companies have been long-standing issues," emphasizing, "The solution to this is to promote more M&A."

With geopolitical tensions between the U.S. and China escalating, the position of Chinese buyers in the U.S. M&A market has weakened, which is working in favor of Japanese companies. Foreign media reported that U.S. companies currently selling assets are placing Chinese companies at the lowest priority on their bidder lists.

Masahiko Ishida, an M&A specialist lawyer at global law firm DLA Piper, stated, "It is clear that Japanese companies will expand overseas M&A," emphasizing, "Japan's population is declining and the domestic market is shrinking. Japanese companies must expand overseas markets; there is no other choice."

This content was produced with the assistance of AI translation services.