Image credit: Fortune
Experts gathered at the “2024 Korea-Japan Cross-Border M&A Forum” in Yeouido Korea Economic Association Hall, Seoul on July 10, to discuss the potential for Korean companies to acquire small but technologically advanced Japanese firms. The forum, jointly hosted by the Korea M&A Exchange (KMX) and Nihon M&A Center (NMA), highlighted the opportunities and challenges in cross-border mergers and acquisitions (M&A) between the two nations.
Kenji Miyama, an M&A consultant from NMA, delivered a keynote presentation emphasizing the significant potential for business growth through the acquisition of Japanese companies. "Among the approximately 3.8 million small and medium-sized enterprises in Japan, 1.27 million lack successors," Miyama stated. "Of these, 600,000 are profitable companies, meaning there is significant potential for business growth if suitable owners are found." He further noted the advantages of the current economic climate, "Especially with the Yoon Suk-yeol administration advancing economic cooperation between Korea and Japan, and the advantage of acquiring Japanese companies more cheaply due to the weak yen."
The forum's discussions come at a time when recent M&A activity between Korea and Japan has been minimal. According to KMX, the scale of domestic cross-border M&A over the past five years (2019-2023) amounts to approximately 18 trillion won (approximately $13.3 billion). Of this, M&A related to the United States and the Cayman Islands accounts for about 6 trillion won, whereas the scale of cross-border M&A with Japan over the past five years is only 58.7 billion won (0.3%).
Historically, there have been instances of Korean companies acquiring Japanese firms, such as POSCO's acquisition of a steel plate company in Fukuoka and Leading Investment & Securities' acquisition of Zeke Securities, but these deals were all completed before 2010. The current lack of activity is seen as a missed opportunity, especially given the demographic challenges in Japan, where an aging population and a declining birthrate have led to a shortage of successors for many SMEs.
Han Jeong-hwa, former head of the Small and Medium Business Administration and now an honorary professor at Hanyang University Business School, also gave a keynote presentation. He stressed the importance of more active cross-border deals between Korea and Japan to stabilize the global supply chain. "In the uncertain international situation with the U.S.-China tech hegemony competition, the Russia-Ukraine war, and the close ties between Russia and North Korea, cross-border deals between Korea and Japan need to be more active to stabilize the global supply chain and enhance overseas competitiveness," Han stated.
The forum underscored the need for Korean companies to seize the opportunity to acquire profitable Japanese firms, which could provide new avenues for business expansion and technological advancement. With the Yoon Suk-yeol administration's efforts to improve economic cooperation between Korea and Japan, and the financial advantage presented by the weak yen, the conditions are favorable for such cross-border M&A activities.
As small but technologically advanced Japanese companies face the risk of going bankrupt despite being profitable due to the lack of successors, experts argue that Korean companies should actively pursue the acquisition of these firms. This strategy could not only help stabilize the global supply chain but also enhance the overseas competitiveness of Korean businesses.
Source: https://www.businesskorea.co.kr/news/articleView.html?idxno=220942