Deal flow in Japan will likely keep up its brisk pace, thanks in part to regulatory policies that are fueling mergers and acquisitions as well as broader macroeconomic trends, according to Alvarez & Marsal¡¯s Paul Aversano.
The number of deals targeting companies in Japan exceeded 900 in the first three months of the year as it has in each quarter going back to late 2024, according to data compiled by Bloomberg. Momentum should continue ¡°if not accelerate in the short-to-medium term,¡± Aversano, global practice leader of A&M¡¯s global transaction advisory group, said in an interview on Wednesday.
The conflict in the Middle East is, for now, posing no disruption to M&A in Japan, Aversano said. Instead, country-specific forces are helping drive deals, he said. Deals announced during the first three months of this year include Nippon Sheet Glass¡¯s plan to be taken private by a fund managed by Apollo Global Management and KKR & Co.¡¯s offer to take Taiyo Holdings private.
Aversano pointed to efforts to improve the return on equity of listed companies ¡ª part of government-led corporate reform initiatives ¡ª as a catalyst for M&A. Demographic shifts are also playing a part, as many aging founders of established businesses are more willing to be bought out.
The cheap yen is also making valuations attractive for a cross-border investment, Aversano said.
Among industries, the aerospace, defense and space sector is expected to lead the pickup in deals this year in Japan as well as around the world, Aversano said.
¡°All of the aerospace and defense industry and sub-industries are benefiting from this boom in government spending,¡± he said. ¡°You see investors trying to capitalize on that.¡±
His firm is also hiring experts in the area.
While transactions in a few sectors have been shelved since the start of hostilities in Iran, such as travel and leisure, the current conflict isn¡¯t stopping or slowing global dealmaking in general, he said.
¡°There is so much wealth in the Middle East amongst the sovereign wealth funds that they are almost immune to global economic trends,¡± Aversano said. They want to diversify their oil revenue and diversify away from geopolitical risks.
¡°You are going to see potentially even an acceleration of capital out of the Middle East for fear of this happening again,¡± he said.
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