Corporate divestments, PE investments and activist campaigns: a virtuous circle for Japan

In the last few years, several trends have gained traction in Japan’s M&A market. The trends had already begun to take hold before COVID, which did not slow their development. In our latest insight, we take a closer look at three of the most significant trends, which are interrelated and are driving one another: 1) divestments by Japanese companies; 2) the ever-increasing activity of PE funds; and 3) the growing influence of activist funds.

Key takeaways:

Japanese companies are increasingly willing to divest non-core subsidiaries and assets, driven by changing perceptions about corporate divestments

• This has been led by large-cap companies so far, but smaller companies are expected to join as they also begin to appreciate the benefits

Divestments by Japanese companies are proving to be fruitful targets for PE funds, who are aggressively entering Japan market and raising record levels of capital

• Many corporate carveouts in Japan over the last few years have seen PE funds emerge as the successful acquirer

Another set of investment funds, activist investors, have stepped up their activity in Japan, embarking on campaigns against large companies to pressure them to increase corporate value

• A common demand of activist campaigns is the divestment of non-core assets, which feeds into the first trend, thus continuing the cycle

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