n the fast-changing environment of the digital economy, Japanese businesses have looked to mergers and acquisitions as an essential part of business growth strategy, as it allows businesses to acquire new skills and technology, supplement research and development activities, as well as expand to new markets. For an island nation with a decreasing population, market expansion is particularly relevant in cross-border M&A (merger and acquisitions) deals, as it provides opportunities for businesses to tap into various local marketplaces and acquire the needed local knowledge and skillsets to be able to develop their business.
In the most recent Growth Strategy Implementation Plan, which was published in June 2019, the Cabinet Office identified the changing role of large corporations in promoting innovation, from supporting new businesses to go public, to buying out such new businesses—which provides a longer gestation period for research and development allowing the new businesses to innovate.
While a former global leader in business growth and innovation, Japanese businesses have failed to keep up with the fast-paced growth of the leading global companies. Much of this can be tied to the burst of the real estate bubble, which is deeply rooted in the aging and shrinking population and has led to the current stagnant economy. With a decreasing rate of consumption, as well as a decreasing workforce in Japan, businesses are forced to look to foreign markets for opportunities to grow.
Although the number of deals has increased, Japanese businesses have struggled to successfully take advantage of cross-border M&A activities and fully incorporate them into growth strategies. As a result, a number of mergers and acquisitions have resulted in high costs, but limited return, and even failed mergers with many key talents leaving the company. In Japan, an island nation that has been highly homogeneous, traditional and domestic-oriented, companies did not have the agile environment and mindset that were required to fully engage and accept the different perspectives, talent, and cultures, and to utilize said aspects to grow and innovate the business.
At the same time, COVID-19 has put the Japanese economy to a sudden halt and has forced businesses to rethink growth strategies. Unlike past pandemics, COVID-19 has had an extended negative impact on the global economy, with a growing hint for a possible global recession. In such times of uncertainty, businesses have adopted for strategies that focus on keeping employees and their business safe, and started to cut back on growth strategies, such as cross-border M&A.
However, as we enter the “new normal,” businesses are now forced to recognize the shift in consumer behavior, supply chains, and risks, and need to reposition themselves in the new marketplace. In doing so, now more than ever, cross-border M&A can be seen as a tool to diversify and rebalance the business to become more resilient in these turbulent times.
Cross border M&A is seen as a solution to COVID-19 impact in Japan. As we live with COVID-19 in this new normal, Japan will have to look to cross-border M&A as an option to revitalize business and to become more resilient. While many businesses are looking to simplify supply chain by producing in-house or domestically, Japanese businesses do not have the resources or the capacity to do so for the long term, due to the shrinking population and lack of raw resources.
To become more resilient, Japanese businesses must reevaluate their supply chain, allowing for multiple routes to source vital parts and resources. That being said, it will be critical for businesses to also reconsider the working environment and mindset, to be truly inclusive of all cultures and engage more effectively with consumers in different markets.
However, for major Japanese corporations that have established their values on history and tradition, the challenges to cross-border M&A have exemplified the difficulties for such businesses to make changes in working environments, in order to adopt new ideas and cultures. While there are a number of existing challenges, such as the continued use of paper documentation, fax and the traditional Japanese seals, “Inkan” or “Hanko”, for signing off on documents, another key factor that has been communication, particularly between the acquiring company and the employees of the acquired company. As such, the success of cross-border M&A can be identified by a company’s ability to effectively communicate and engage with the new group of employees that will be contributing to their business.
The key to successful cross-border M&A. Communication is vital in any business. As two parties come together to share a goal or develop a new objective, communicating internally with consideration and transparency is a core component of any successful merger or acquisition. This is especially true when the two parties come from different backgrounds and ideologies, such as a cross-border M&A.
While text and other digital means have been our preferred channels of communication in our daily lives, a recent APCO survey has found that employees prefer more personalized and direct forms of communication. While digital is used, such as in the form of email, other personalized methods, such as face-to-face meetings and phone calls, are more preferred than mass communication, such as newsletters.
The APCO survey also identified that employees want to hear from their direct managers in most situations, surrounding updates such as product or service announcements, employee volunteer programs, layoffs, and new corporate policies.
Personalized communication and communication from direct leadership demonstrate an acquiring company’s best efforts to engage closely with the employees of the acquired company to help them better understand and align with the company’s missions and objectives. At the same time, through such close engagement, the new employees will also be able to more effective express their concerns and perspectives, which will allow the company to have an open and agile mindset while creating a transparent working environment.
As cross-border M&A will continue to be an essential strategy to keep up in this ever-changing global and digital economy, companies that are able to provide an environment that encourages engagement by both parties will ultimately be able to maximize the benefits of cross-border M&A.
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Cross-Border M&A in the Era of COVID-19
Photo by Ryoji Iwata via Unsplash.
July 1, 2020
I
n the fast-changing environment of the digital economy, Japanese businesses have looked to mergers and acquisitions as an essential part of business growth strategy, as it allows businesses to acquire new skills and technology, supplement research and development activities, as well as expand to new markets. For an island nation with a decreasing population, market expansion is particularly relevant in cross-border M&A (merger and acquisitions) deals, as it provides opportunities for businesses to tap into various local marketplaces and acquire the needed local knowledge and skillsets to be able to develop their business.
In the most recent Growth Strategy Implementation Plan, which was published in June 2019, the Cabinet Office identified the changing role of large corporations in promoting innovation, from supporting new businesses to go public, to buying out such new businesses—which provides a longer gestation period for research and development allowing the new businesses to innovate.
While a former global leader in business growth and innovation, Japanese businesses have failed to keep up with the fast-paced growth of the leading global companies. Much of this can be tied to the burst of the real estate bubble, which is deeply rooted in the aging and shrinking population and has led to the current stagnant economy. With a decreasing rate of consumption, as well as a decreasing workforce in Japan, businesses are forced to look to foreign markets for opportunities to grow.
Although the number of deals has increased, Japanese businesses have struggled to successfully take advantage of cross-border M&A activities and fully incorporate them into growth strategies. As a result, a number of mergers and acquisitions have resulted in high costs, but limited return, and even failed mergers with many key talents leaving the company. In Japan, an island nation that has been highly homogeneous, traditional and domestic-oriented, companies did not have the agile environment and mindset that were required to fully engage and accept the different perspectives, talent, and cultures, and to utilize said aspects to grow and innovate the business.
At the same time, COVID-19 has put the Japanese economy to a sudden halt and has forced businesses to rethink growth strategies. Unlike past pandemics, COVID-19 has had an extended negative impact on the global economy, with a growing hint for a possible global recession. In such times of uncertainty, businesses have adopted for strategies that focus on keeping employees and their business safe, and started to cut back on growth strategies, such as cross-border M&A.
However, as we enter the “new normal,” businesses are now forced to recognize the shift in consumer behavior, supply chains, and risks, and need to reposition themselves in the new marketplace. In doing so, now more than ever, cross-border M&A can be seen as a tool to diversify and rebalance the business to become more resilient in these turbulent times.
Cross border M&A is seen as a solution to COVID-19 impact in Japan. As we live with COVID-19 in this new normal, Japan will have to look to cross-border M&A as an option to revitalize business and to become more resilient. While many businesses are looking to simplify supply chain by producing in-house or domestically, Japanese businesses do not have the resources or the capacity to do so for the long term, due to the shrinking population and lack of raw resources.
To become more resilient, Japanese businesses must reevaluate their supply chain, allowing for multiple routes to source vital parts and resources. That being said, it will be critical for businesses to also reconsider the working environment and mindset, to be truly inclusive of all cultures and engage more effectively with consumers in different markets.
However, for major Japanese corporations that have established their values on history and tradition, the challenges to cross-border M&A have exemplified the difficulties for such businesses to make changes in working environments, in order to adopt new ideas and cultures. While there are a number of existing challenges, such as the continued use of paper documentation, fax and the traditional Japanese seals, “Inkan” or “Hanko”, for signing off on documents, another key factor that has been communication, particularly between the acquiring company and the employees of the acquired company. As such, the success of cross-border M&A can be identified by a company’s ability to effectively communicate and engage with the new group of employees that will be contributing to their business.
The key to successful cross-border M&A. Communication is vital in any business. As two parties come together to share a goal or develop a new objective, communicating internally with consideration and transparency is a core component of any successful merger or acquisition. This is especially true when the two parties come from different backgrounds and ideologies, such as a cross-border M&A.
While text and other digital means have been our preferred channels of communication in our daily lives, a recent APCO survey has found that employees prefer more personalized and direct forms of communication. While digital is used, such as in the form of email, other personalized methods, such as face-to-face meetings and phone calls, are more preferred than mass communication, such as newsletters.
The APCO survey also identified that employees want to hear from their direct managers in most situations, surrounding updates such as product or service announcements, employee volunteer programs, layoffs, and new corporate policies.
Personalized communication and communication from direct leadership demonstrate an acquiring company’s best efforts to engage closely with the employees of the acquired company to help them better understand and align with the company’s missions and objectives. At the same time, through such close engagement, the new employees will also be able to more effective express their concerns and perspectives, which will allow the company to have an open and agile mindset while creating a transparent working environment.
As cross-border M&A will continue to be an essential strategy to keep up in this ever-changing global and digital economy, companies that are able to provide an environment that encourages engagement by both parties will ultimately be able to maximize the benefits of cross-border M&A.
