In a strategic move to alleviate the mounting pressures from shareholders and financial markets, an increasing number of large companies in Japan have been opting for management buyouts (MBOs) to transition from being publicly listed to private entities.
The total value of MBO deals in Japan skyrocketed to a record-breaking ¥1.4 trillion in 2023, marking a significant surge in MBO activity. This trend has been underscored by prominent deals like that of Taisho Pharmaceutical Holdings, as reported by Tokyo-based merger and acquisition consulting firm Recof.
Traditionally, Japanese businesses have viewed being a public company as advantageous for gaining name recognition, credibility, and access to human resources and loans. However, the landscape has shifted in recent years, with mounting tensions between corporate management and shareholders. Activist investors have been vocal in demanding reforms, including the divestment of unprofitable ventures and increased returns to shareholders through dividends and share buybacks.
In response to these pressures, Taisho Pharmaceutical chose to go private through an MBO, recognizing that as a publicly listed company, it would face persistent demands for short-term profits and shareholder returns. This pressure was deemed detrimental to the company’s long-term strategic goals.
Another notable case is Toshiba, which underwent privatization through a takeover bid led by a consortium headed by investment fund Japan Industrial Partners following clashes with activist shareholders.
Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, commented on the growing burden faced by listed companies, attributing it in part to the Tokyo Stock Exchange’s push for enhanced capital efficiency and stock prices. He noted that MBOs offer a solution by relieving companies of these burdens, enabling more flexible business management and structural reforms.
The trend is gaining momentum, with Aoki Super, a supermarket chain in Aichi Prefecture, announcing its decision to pursue an MBO at the beginning of 2024. As financial markets and investors continue to exert pressure on listed companies, the momentum for MBOs is expected to persist.
Yuko Yoshitomi, president of Recof Data, anticipates that the number and value of MBOs will remain substantial in Japan, reflecting the ongoing shift in corporate strategies amid evolving shareholder dynamics and market demands.
(Source: Jiji | Japan Times)
