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What opportunities do you see for foreign companies looking to engage in M&A activity in Japan?

Benes: When you can do what amounts to a cross-border stock swap, for the first time, you're enabling the buyer to share its upside and share his growth with the sellers.  If you can't use your stock in an M&A transaction, you have to use cash.  That means you're fixing, or “capping,” that upside.  If the sellers get a premium, they get a premium of 20-30%, but the premium is capped at 20-30%.  They get that for certain, but that's all they get.  That's the nature of a cash transaction.  But what happens after that?  From the point of view of the sellers, they are out. 

In a triangular merger using stock, it's different.  The selling shareholders continue owning something that will deliver future gains and returns if performance is good.  And they are doing the transaction precisely because they believe the synergies of these companies will accelerate future growth and profits, and some of them (the owner-mangers) will become participants in a larger, combined enterprise.  The Japanese portion that was sold will become part of that larger organization, and if those synergies and growth do in fact occur, the stock of the combined firm will enjoy the additional upside.  The “new” stock that shareholders now own will appreciate more. 

That world, particularly when it comes to technology industries, is a very dynamic one that can be particularly attractive to both sides.  Starting now – if there is tax deferral – we should see a freer flow of ideas and dialogue as to what sorts of corporate combinations and joint strategies can create that upside. This is very beneficial for both countries – for their people, economies, and markets.

The views expressed in this article are not necessarily those of JETRO.