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September 2006 – Next May, foreign-affiliated companies in Japan will be allowed to engage in triangular mergers—that is, using shares of their parent companies to engage in mergers and acquisitions of other companies in Japan.

JETRO asked Mr. Nicholas E. Benes to clarify what a triangular merger is and to offer his projection on how the new law could impact M&A activity in Japan.

Mr. Benes serves as chairman of the FDI Committee of the ACCJ and President of JTP Corporation, a boutique investment bank specializing in mergers and acquisitions advice principally in the Japanese market. He is also an inactive member of the bar in California and New York. 

JTP was the first investment bank in Japan to arrange a cross-border stock swap in 1996, when Intuit bought Milky Way, a Japanese software company, by way of stock swap.  

What do you anticipate will happen once foreign-affiliated companies are able to engage in mergers and acquisitions using foreign shares next May?

Benes: We'll see a gradual interest in exploring deeper, fuller combinations close to merger between foreign and domestic companies in both directions.

For out-in flows, flows coming into Japan, the new law should be particularly interesting to growth companies in the US, which are the kind of firms who would like to use their stock in transactions as opposed to cash, so they can save cash for operational purposes.  There is growing interest in those types of transactions, which by the way are also interesting for entrepreneurs in Japan because they get to receive foreign-listed stock that is liquid and has good upside as well.