According to the CEO of ANZ Banking Group in Japan, Peter Davis, Japanese financial companies with disposable cash will continue to search out mergers and acquisitions in Australia.
“I think we’ll continue to see a surge of activity and interest coming from Japan. There are many firms with cash burning a hole in their pocket and the financial services area is a very attractive market for them to get into, with most Australian companies looking for investors,” said Davis.
Prime Minister Shinzo Abe has been outspoken on the subject of Japanese companies expanding abroad, and his government’s economic policies have greatly encouraged them to do so leading to a surge in M&A activity, especially in one of its closest trading partners, Australia.
In a deal thought to be worth nearly $8 billion, US financial firm HCC Insurance was bought out by Tokio Marine Holdings. According to investment firm Sinolink Japan, in 2015 alone there have been international deals made involving Japanese companies totalling over $500 billion, and we are only half way through the year. In the whole of last year the total was less than that.
National Australia Bank's life insurance unit is currently talking over a deal with Nippon Life that could be worth nearly $3 billion, while Tower Australia has already agreed terms with another Japanese life insurer, Dai-ichi.
Japanese firms are traditionally very wary of emerging markets, and are much more likely to invest in developed countries with strong infrastructure and employee experience, despite the higher price they need to pay for those luxuries. Thanks to the Bank of Japan’s huge monetary stimulus, capital cost is insignificant which allows their companies to accept lower starting returns when acquiring business abroad.
Given the limitations at home for consolidation, where aggressive takeovers are not only taboo but also outlawed, it’s no shock that Japanese companies are looking elsewhere for their expansion, even if their average dividend payout is less than 25 percent.
Mr Davis says that due to the non-existent interest rates there is very little money to be made for ANZ in Japan, and is unsurprised the 3,500 companies listed on the Tokyo stock exchange, which are sitting on close to a trillion dollars in cash, are coming to Australia in their droves. Most of ANZ’s profits in Japan come from their corporate clients.
