Japanese Corporate Landscape: A New Era Awaits
By Martin Fritz, Tokyo
Partners Form Alliance: Activists Collaborate with Private Equity in Japan's Financial Landscape
Welcome to the new era of Japanese listed companies! For years, we've watched as Japan took the runner-up spot for the most activist campaigns, and it seems likely they'll secure that position once more in 2024. Never before have top managers faced such pressure from shareholders, domestic and foreign. The concept of shareholder value, once dismissed in Japan, is now front and center.
In the last three years, activist campaigns have been more common in Japan than in any other nation apart from the USA. Data from Insightia confirms this trend, with a staggering 80 campaigns in the first half of 2024—more than Germany, France, and the UK combined. According to Nicholas Smith, Japan strategist at CLSA Securities, the country's role as a hub for private equity and shareholder activism worldwide is set to continue.
Growing Interest in Private Equity
The growth in Japan's private equity market has several driving factors:
- Fundraising Boom: Funds focused on Japan raised an impressive $8.8 billion in 2024, marking a substantial increase from the previous year's $6.9 billion. This surge in investor interest and confidence is a testament to the attractiveness of the Japanese market.
- Expanding Institutional Investment: Japan's Government Pension Investment Fund (GPIF) expanded its private equity holdings by 46%, a hefty ¥680 billion ($4.2 billion), as of March 2024. The rise in institutional investment solidifies Japan's position within the global private equity landscape.
The Rise of Shareholder Activism
Shareholder activism has been on the rise in Japan, pushed by several factors:
- Corporate Governance Reforms: Over the past twelve years, Japan has been implementing corporate governance reforms aimed at enhancing shareholder returns and aligning corporate practices with global standards. This shift provides a more favorable environment for shareholder activism.
- Record-Breaking Activism: 2024 saw activist investors take stakes worth ¥3 trillion in more than 120 companies. This momentum is likely to drive ongoing improvements in governance and fuel interest in Japan's equity market.
- Corporate Activity: The record-breaking share buybacks (over ¥28 trillion) and a remarkable number of M&A transactions in 2024 are clear signs of strong corporate activity. This activity draws private equity investors and activist shareholders alike.
All told, Japan's growth in private equity and shareholder activism stems from its ongoing governance reforms, increased institutional investment, and robust corporate activity. It's an exciting time for the Japanese market, and we'll be here to bring you updates as the story unfolds!
- The Japanese landscape of listed companies is expected to continue its leadership in activist campaigns, especially in 2024.
- The concept of shareholder value, once overlooked in Japan, is now a focal point, with shareholders, both domestic and foreign, pressuring top managers.
- The growth in Japan's private equity market is being driven by a fundraising boom and an expansion of institutional investment, particularly from the Government Pension Investment Fund.
- Shareholder activism in Japan has increased significantly, propelled by corporate governance reforms, record-breaking activism, and strong corporate activity, making it an appealing market for private equity investors and activist shareholders.
