How Japan firms can sustain the M&A surge

JAPANESE M&As (mergers and acquisitions) have risen significantly in the last three years, increasing from 37 per cent to 67 per cent of all Japanese corporations' foreign direct investment. The year 2015 was also a banner year for Japan, logging in over US$85 billion in outbound investment.

SoftBank's acquisition of British chip designer ARM Holdings for US$32 billion in 2016, Suntory Holdings' 2014 purchase of US beverage maker Beam Inc for US$16 billion, Tokyo Marine's acquisition of HCC Insurance Holdings Inc of the United States for US$7.5 billion, Japan Tobacco International's acquisition of Natural American Spirit for US$5 billion and Daiichi-Sankyo's US$4.2 billion takeover of Ranbaxy Laboratories in India are some acquisitions that made waves in the last few years.

History shows there was a similar wave of Japanese companies acquiring global assets from late 1980s to early 1990s. An era now infamously known as the "bubble era", it was marked by several spectacular financial and management failures. Among these were the 1995 scrapping of its US$2 billion stake in the Rockefeller Center by Mitsubishi Estate and the winding up, also in 1995, of Matsushita Electric Industrial Co's purchase of MCA (owner of Universal Pictures) which it had bought in 1990 for US$ 6.6 billion. In 2014, Daiichi-Sankyo sold its stake in Ranbaxy, six years after its acquisition, at a 37 per cent discount.