In early December, Nagatanien, Japan's premier maker of popular instant powder ochazuke, wrapped up a $130m takeover of Chaucer Foods, a supplier of freeze-dried fruits and vegetables to Kellogg’s and PepsiCo.The deal represents the first significant oversea acquisition for Nagatanien, a family business founded 63 years ago. Nagatanien is just one of the several Japanese companies that made their first steps in the international M&A market in the last 6 months. What motivated them?
To begin with, several Japanese companies having scarcity of UK components in their portfolios of brands are willing to take advantage of the uncertainty window opened with Brexit to correct the balance. Besides, some Japanese companies are looking for acquisitions in the UK market to acquire or strengthen the distribution routes for their products in the UK and in the wider European market. This is the case, for example, of the acquisition of Scotch Frost by Japan’s National Federation of Agricultural Cooperative Associations (Zen-Noh) on November. Zen-Noh, a co-operative that is in practice a monopolist in the domestic Japanese agricultural and livestock market, hopes that Scotch Frost will sustain exports to those markets where the consumption of Japanese food (ramen, sushi etc.) is expected to rise in the future.
Besides strategic reasons, currency movements also helped boosting the appetites. The increased uncertainty following the Brexit vote weakened the British pound with respect to the Japanese Yen: today, the Japanese currency remains 7% higher against the sterling. At the same time, the rise of protectionist winds in countries such as the U.S. contributed to increase the attractiveness of UK targets against U.S. peers.
The combination of all of these reasons has made Japanese companies rush to take advantage of this favourable window to pursue M&A deals in the UK, which, thanks to its stable labour conditions, is perceived as a relatively safe laboratory where they can test expansionary strategies in Europe.
As such, these first deals could be just the preview of a larger wave of acquisitions and investments. Whether this will happen or not will depend on how the Brexit will proceed.
Indeed, Japanese buyers are well conscious that a hard Brexit would severely endanger the usefulness of their investments as gateways to the wider European market. Japan has been very vocal in warning Britain again the negative consequences of a harsh Brexit. On this regard, in September, it issued a 15-pages memo including a list of terms that must be met during the Brexit execution to safeguard Japanese investments. These terms comprise timely information disclosure on the status of Brexit and future negotiations, maintaining duty-free trade between UK and the EU, free movement of capital and services and single passporting system applicable to the UK.
Chiara Cauli
To begin with, several Japanese companies having scarcity of UK components in their portfolios of brands are willing to take advantage of the uncertainty window opened with Brexit to correct the balance. Besides, some Japanese companies are looking for acquisitions in the UK market to acquire or strengthen the distribution routes for their products in the UK and in the wider European market. This is the case, for example, of the acquisition of Scotch Frost by Japan’s National Federation of Agricultural Cooperative Associations (Zen-Noh) on November. Zen-Noh, a co-operative that is in practice a monopolist in the domestic Japanese agricultural and livestock market, hopes that Scotch Frost will sustain exports to those markets where the consumption of Japanese food (ramen, sushi etc.) is expected to rise in the future.
Besides strategic reasons, currency movements also helped boosting the appetites. The increased uncertainty following the Brexit vote weakened the British pound with respect to the Japanese Yen: today, the Japanese currency remains 7% higher against the sterling. At the same time, the rise of protectionist winds in countries such as the U.S. contributed to increase the attractiveness of UK targets against U.S. peers.
The combination of all of these reasons has made Japanese companies rush to take advantage of this favourable window to pursue M&A deals in the UK, which, thanks to its stable labour conditions, is perceived as a relatively safe laboratory where they can test expansionary strategies in Europe.
As such, these first deals could be just the preview of a larger wave of acquisitions and investments. Whether this will happen or not will depend on how the Brexit will proceed.
Indeed, Japanese buyers are well conscious that a hard Brexit would severely endanger the usefulness of their investments as gateways to the wider European market. Japan has been very vocal in warning Britain again the negative consequences of a harsh Brexit. On this regard, in September, it issued a 15-pages memo including a list of terms that must be met during the Brexit execution to safeguard Japanese investments. These terms comprise timely information disclosure on the status of Brexit and future negotiations, maintaining duty-free trade between UK and the EU, free movement of capital and services and single passporting system applicable to the UK.
Chiara Cauli