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The head of one of Japan’s largest associations of company executives said the country had reached a “major turning point” of corporate change after a critical mass of shareholder activists forced companies out of their decades-long slumber.
The comments by Takeshi Niinami, president of Japanese beverage group Suntory and chairman of Japan’s influential 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 Management and ValueAct have also become much bolder in their choice of targets – a list that now includes Japan’s biggest property developer, Mitsui Fudosan, and carmaker Nissan.
Under pressure from activist investors, the past year has also produced a sharp rise in the value of unsolicited takeover bids – a tactic once treated as taboo but now approved by the government through a change in merger guidelines.
In an interview with the Financial Times, Niinami said the rise of activism and its influence on Japanese chief executives marked the end of decades of corporate stagnation, deflation and inertia.
“The lost 30 years are over and we are facing a major turning point. That should be positive,” said Niinami, who predicted that activism, private equity deal-making and domestic consolidation will continue to increase in 2025.
“It’s a turning point for Japan to become more effective, more productive and more profitable,” said Niinami, who added that Japanese management will now be forced to pay more attention to the metrics that investors care about the most. much, such as the cost of capital. and return on equity.
The race was now, Niinami said, for CEOs to reshape their companies before an activist told them to. The unsolicited bid for Seven & i by Canada’s Alimentation Couche-Tard had undercut the stock, he said.
“This message is very vital to make all CEOs think what’s wrong with my company? If there is something wrong, we have to fix it, otherwise we will have a big warning from the activists. Sleeping companies will now be awake,” said Niinami.
Apart from ACT’s $38 billion unsolicited bid for Japan’s largest convenience store operator, deals in 2024 included Nidec’s attempted $1.6 billion “no-consent takeover” of Makino Milling and a tug of war between the giants of private equity KKR and Bain on the IT services group. Fuji Soft.
Nicholas Smith, Japan strategist at CLSA Securities, said Japan was already the second largest market globally for private equity and activism. Japan accounted for two-thirds of Asian activist events, he said, and was getting even further.
“Globally, value investors and event traders are looking forward to the Seven & i trade as a possible starting point for Japan’s rapid evolution into a market for corporate control,” Smith said.
But the transformation of Japan’s stock market, investment bankers and other deal advisers warn, should be seen as a fragile process. Jeremy White, an M&A partner at law firm Morrison Foerster in Tokyo, said the number of shareholder confrontations or unsolicited bid stories could still decline in 2025.
“I think that would signal that there is enough friction in the market to stop what looks like the direction of travel. I think what we have now is a speed going in a certain direction: it doesn’t need to go in reverse, just applying the brakes is going to be bad enough,” White said.
