EIJS Working Paper Series,
Stockholm School of Economics, The European Institute of Japanese Studies

Abstract: In recent years, the pattern of M&As in Japan has changed significantly. Increasingly, managers and owners of Japanese firms seem to have realized that there are efficiency benefits with M&As, and that there exist strategic dimensions in doing M&As. Almost on a daily basis, newspapers report on new M&A deals, involving all industries in the country. However, the skepticism to M&As is still very deep-rooted, and there are fewer Out-In M&As than In-In M&As. The distribution of M&A activities among the industrial sectors is extremely uneven, as well as the distribution of the type of M&A. Overall, acquisitions and capital participation are the most common modes of M&A. Looking closer, the pattern of M&A depends on the industry and the competition situation in that particular industry. Further, in studying Japanese M&As, a distinction between large firms and small- and medium-sized firms is necessary. The reason for this is the difference in nature between these two groups of firms. While large firms are international enough to recognize a foreign firm as a suitable M&A partner or buyer, SMFs make M&A decisions out of a different set of perceptions. Therefore, the M&A behavior becomes more diverse in the latter group than in the large firms sector. The conclusions of this paper are twofold. First, apart from the M&A pattern itself, the cultural factors heavily influence the M&A decisions of all firms in Japan. Second, the future of Out-In M&As is much dependent on how much the Japanese economic performance improves.

Keywords: Japan; Mergers & Acquisitions; Keiretsu; Small-and Medium-sized firms.

JEL-codes: F23; G34

20 pages, February 13, 2002

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