30 Mar Japan’s Australian M&A: Rapidly Diversifying
Hitachi Construction Machinery’s announcement this month that it has been successful in its takeover bid for leading heavy engineering company, Bradken is just one of an increasing number of recent Japanese investments in Australia. In calendar 2015, the stock of direct foreign investment into Australia saw Japan move from the 3rd biggest overseas investor to 2nd, eclipsing the long held position of the UK. (The US is Australia’s largest foreign investor.)
After years of concentration on organic growth and eschewing majority acquisition, the last few years have seen a dramatic shift in Japanese investment strategies in Australia. Equally the focus, especially for the Japanese trading houses, was in the resources and energy area. But the strategy has been slowly evolving and now is rapidly gaining momentum. Big ticket acquisitions reflect the need for Japanese companies to source more of their income from overseas as they face a shrinking but affluent market at home. To do this they have had to move away from minority equity as it will not deliver the dividend income they require. Organic growth, much prized by Japanese management and sensible in a relatively stable economic environment is no match for the volatility and compression of the time-rate-of-change which is occurring in a number of markets and sectors. Japanese M&A in the Australian alcohol and beverage market was an early example but these have since been followed by equally spectacular acquisitions in logistics and life insurance. However, there have been a spate of recent Japanese acquisitions which are linking Australian business even more closely with a broader range of players in Japan. Interestingly, some of these deals are by lesser internationally known Japanese corporates and equally of smaller magnitude. Sectors in Australia in which there has been either Japanese acquisition or “green fields” establishments over the last 12-24 months include:
- Construction
- Fuel Storage
- Logistics
- Life Insurance
- Wealth Management
- Stockbroking
- IT Consulting
- Advertising
- Agriculture
- Car Parking Stations
- Motor Vehicle Retailing
- Food Packaging
- Forestry
- Resources