International Business Mergers and Acquisitions in Japan

231 Pages·2015·4.3 MB·English

by  Ralf Bebenroth (auth.)

International Business Mergers
and Acquisitions in Japan
Ralf Bebenroth
International Business
Mergers and Acquisitions
in Japan
1 3
Ralf Bebenroth
Kobe University
Research Institute for Economics
& Business Administration (RIEB)
Kobe, Hyogo
Japan
ISBN 978-4-431-54988-8 ISBN 978-4-431-54989-5 (eBook)
DOI 10.1007/978-4-431-54989-5
Library of Congress Control Number: 2015934139
Springer Tokyo Heidelberg New York Dordrecht London
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Preface
This book is about mergers and acquisitions (M&A) in Japan and contains 15 chap-
ters, which can be split into three major parts. First, international business topics;
second, M&A; and third, human resources in M&A processes. Most of the chapters
have been developed steadily over the years while teaching the topic of mergers
and acquisitions. Not only did I teach this subject at Kobe University, my home
university, but also at Konan University for 8 consecutive years and at Ritsumeikan
University for 4 consecutive years. I was also a guest lecturer at several other Japa-
nese and foreign universities such as Doshisha, Tuebingen, Hamburg, and Kassel
universities.
This book is written for everyone interested in M&A and Japan, especially for
students. The targeted audience is Japan interested business students at the master’s
level. English-speaking Japanese students should also find this book useful. Re-
cently, there has been an increase in English-speaking business classes at Japanese
universities. It is my hope that some M&A classes can be created in which this book
serves as the basis for the curriculum.
Several people helped me to successfully prepare and finish the book. I want
to express my gratitude to Prof. Shinobe Muramatsu (Emeritus Professor at Seikei
University, Tokyo) who touched me with his kindness for over 13 years. He is not
only passionate about M&A but also has supported me in my research over the
years. I would also like to thank William Wainwright, one of my previous students
at Konan University, for a very careful proofreading. I would also like to thank Lara
Makowsky, my research assistant and master’s student in the SESAMI program at
Kobe University, who amended some of my English sentences, and Nakahara Sho,
a Ph.D. candidate at the graduate school of business at Kobe University, for finding
literature and correcting the spelling of some of the translated Japanese literature.
I would also like to thank my friend Ian Mackenzie for correcting one chapter and
Keith Jackson for giving me guidance in the early stages of the book.
This book is dedicated to my wife, Tomoko, and our daughter, Aiko chan. With-
out their patience, support, and encouragement this book would not have existed.
The author hopes that this book will find its intended readers.
Kobe, November 11, 2014 Ralf Bebenroth
v
Contents
1 Introduction ............................................................................................ 1
References ................................................................................................ 4
Part I Trade and Distribution
2 Japan and Foreign Direct Investment ................................................. 7
2.1 Introduction ..................................................................................... 7
2.2 History of Inward FDI to Japan ...................................................... 8
2.3 Competition for FDI ....................................................................... 12
2.4 Inward FDI to Japan ........................................................................ 13
2.4.1 A ttractiveness of Japan as An Investment Location ........... 14
2.4.2 Japanese Inward M&A ........................................................ 16
2.5 Outward FDI from Japan ................................................................ 16
2.6 Trade Agreements ........................................................................... 19
2.7 Conclusion ...................................................................................... 19
References ................................................................................................ 21
3 Imports, Exports and Foreign Businesses in Japan ............................ 23
3.1 Introduction ..................................................................................... 23
3.2 Imports and Exports ........................................................................ 24
3.2.1 Japanese Imports ................................................................. 24
3.2.2 Japanese Exports ................................................................. 24
3.2.3 Kansai Imports .................................................................... 25
3.2.4 Kansai Exports .................................................................... 26
3.3 Example of Car Manufacturers and Their Exports ......................... 28
3.4 Foreign Affiliated Firms in Japan ................................................... 29
3.4.1 Foreign Affiliated Firms in Overall Japan .......................... 29
3.4.2 Foreign Firms in Japan, Especially in Kansai Area ............ 30
3.4.3 Examples of Foreign Firms in Japan .................................. 32
3.4.4 Changes Caused Through Foreign Firms? .......................... 33
3.5 Conclusion ...................................................................................... 33
References ................................................................................................ 35
vii
viii Contents
4 The Japanese Distribution System ....................................................... 37
4.1 Introduction ..................................................................................... 37
4.2 Structure of Japanese Retail Market and
Regulatory Developments ............................................................... 38
4.2.1 Overview of the Japanese Retail Market ............................ 38
4.2.2 Regulatory Developments: Large-Scale Retail Store Law ..... 38
4.3 Changes at Distribution System ...................................................... 40
4.3.1 Convenience Stores ............................................................. 40
4.3.2 Complexity of the Retail Market ........................................ 41
4.4 Foreign Market Access to Japan ..................................................... 42
4.5 Advantages Beyond Foreignness: Market Area Concentration ...... 43
4.6 Conclusion ...................................................................................... 44
References ................................................................................................ 46
5 Entrance to the Japanese Market ........................................................ 49
5.1 Introdu ction ..................................................................................... 49
5.2 Theoretical Background .................................................................. 51
5.3 Hypotheses ...................................................................................... 53
5.3.1 Effect of Perceived Institutional Market Barriers ............... 53
5.3.2 Effects of Access to Distribution Systems .......................... 54
5.3.3 Effects of Inter Organizational Institutions ......................... 55
5.4 Methodology: Questionnaire Development and Administration .... 55
5.5 Analyses .......................................................................................... 56
5.6 Findings ........................................................................................... 59
5.6.1 General Tests ....................................................................... 59
5.7 Additional Tests .............................................................................. 61
5.8 Discussion ....................................................................................... 61
5.9 Limitations and Future Research .................................................... 63
5.10 Conclusion ...................................................................................... 64
References ................................................................................................ 66
Part II Mergers and Acquisitions
6 Setting the Stage for Mergers and Acquisitions .................................. 71
6.1 Introduction ..................................................................................... 71
6.2 Shareholder Structure ...................................................................... 71
6.3 Legal Changes ................................................................................. 73
6.3.1 Examples of Legal Changes ................................................ 73
6.3.2 Overhaul of Commercial Code ........................................... 73
6.4 M&A and Other Types of Market Entry ......................................... 74
6.4.1 Definitions of M&A ............................................................ 74
6.4.2 Other Types of Market Entry: Joint Ventures ..................... 77
6.5 Hubris, Selection and Market Changing Theory ............................ 78
6.6 Bidder Motivations ......................................................................... 79
6.7 Value Creation Through M&A ........................................................ 80
Contents ix
6.8 Conclusion ...................................................................................... 81
References ................................................................................................ 83
7 Mergers and Acquisitions in Japan ...................................................... 87
7.1 Introduction ..................................................................................... 87
7.2 Development of Japanese M&A Market ......................................... 87
7.3 Strategic Versus Institutional Investors ........................................... 89
7.3.1 Strategic Versus Institutional Inbound M&A to Japan ........ 90
7.3.2 In-Out Acquisitions ............................................................. 91
7.3.3 Cross Border M&A ............................................................. 92
7.4 Different Types of M&A ................................................................. 94
7.5 Examples of Recent In-Out Acquisitions ........................................ 95
7.5.1 Example 1: Nycomed Takeover by Takeda ........................ 95
7.5.2 Example 2: Daikin Takeover of US Goodman ................... 98
7.6 Conclusion ...................................................................................... 101
References ................................................................................................ 103
8 Cross Border Bidders Versus Domestic Ones ..................................... 107
8.1 Introduction ..................................................................................... 107
8.2 Theoretical Arguments for Cross Border Acquisitions ................... 109
8.3 Japanese Inbound M&A .................................................................. 109
8.4 Foreign Bidders to Japan ................................................................ 110
8.5 Hypotheses ...................................................................................... 111
8.6 Data and Method ............................................................................. 113
8.7 Results ............................................................................................. 113
8.8 Discussion ....................................................................................... 116
8.9 Conclusion ...................................................................................... 118
References ................................................................................................ 120
9 Unfriendly Takeovers ............................................................................ 123
9.1 Introduction ..................................................................................... 123
9.2 Market Based and Inefficient Management Theory ....................... 125
9.3 Japanese Market of Unfriendly Acquisitions .................................. 126
9.4 Examples ......................................................................................... 127
9.4.1 Panasonic Takeover of Sanyo (3) ........................................ 127
9.4.2 Steel Partners Japan Almost
Takeover of Noritz Kitchen (4) ........................................... 130
9.5 Defense Measures: Poison Pills ...................................................... 133
9.6 Conclusion ...................................................................................... 135
References ................................................................................................ 137
10 Evaluation Methods and Market Concentration ................................ 139
10.1 Introduction ..................................................................................... 139
10.2 M&A Evaluation Methods and Cost of Capital .............................. 140
10.2.1 M&A Evaluation Methods .................................................. 140
10.2.2 Weighted Average Cost of Capital (WACC) ....................... 143
x Contents
10.3 Market Concentration and Herfindahl Index .................................. 144
10.3.1 Market Concentration ......................................................... 144
10.3.2 Measure of Market Concentration: Herfindahl Index ......... 145
10.4 Example (5) ..................................................................................... 146
10.4.1 Nippon Steel—Sumitomo Metal “Merger” ........................ 146
10.5 Conclusion ...................................................................................... 149
References ................................................................................................ 151
11 Institutional Investors ........................................................................... 153
11.1 Introduction ..................................................................................... 153
11.2 Theory Discussion and Hypotheses Formulation ........................... 155
11.2.1 Arms-Length Principle Versus
Geographic-Proximity Theory ............................................ 155
11.2.2 Hypothesis Development .................................................... 156
11.3 Methods ........................................................................................... 159
11.3.1 Data and Measures .............................................................. 159
11.3.2 Statistical Analysis .............................................................. 161
11.4 Results ............................................................................................. 161
11.5 Discussion ....................................................................................... 164
11.6 Conclusion ...................................................................................... 165
References ................................................................................................ 167
Part III Human Resources in Mergers and Acquisitions Processes
12 O rganizational Identification at Cross-Border
Mergers and Acquisitions: A Theoretical Concept ............................. 173
12.1 Introduction ..................................................................................... 173
12.2 M &A Integration ............................................................................ 174
12.3 Knowledge-Based View in M&A Context ...................................... 175
12.4 Organizational Identification .......................................................... 177
12.5 Communication and Knowledge Transfer ...................................... 178
12.6 Training ........................................................................................... 179
12.7 External Consulting ........................................................................ 181
12.8 Discussion ....................................................................................... 182
12.9 Conclusion ...................................................................................... 182
References ................................................................................................ 184
13 I dentification and Job Satisfaction at
Mergers and Acquisitions ...................................................................... 187
13.1 Introduction ..................................................................................... 187
13.2 Theoretical Background .................................................................. 188
13.2.1 Effect on Procedural Justice ................................................ 188
13.2.2 Effect on Cultural Openness ............................................... 189
13.2.3 Effect of Cultural Openness on Procedural Justice ............. 190
Contents xi
13.3 Methods ........................................................................................... 191
13.3.1 Sample and Procedure ......................................................... 191
13.3.2 Measures ............................................................................. 192
13.4 Results ............................................................................................. 192
13.5 Discussion ....................................................................................... 195
13.6 Conclusion ...................................................................................... 195
References ................................................................................................ 199
14 Cultural Concepts .................................................................................. 203
14.1 Introduction ..................................................................................... 203
14.2 Studies of Cultural Dimensions ...................................................... 204
14.2.1 Cultural Dimension Research by Hofstede ......................... 204
14.2.2 GLOBE Project ................................................................... 208
14.2.3 Cultural Dimension Research by Trompenaars .................. 211
14.3 Conclusion ...................................................................................... 215
References ................................................................................................ 216
15 Expatriates and Other Choices ............................................................. 217
15.1 Introduction ..................................................................................... 217
15.2 Expatriates ....................................................................................... 218
15.2.1 Reasons to Send Expatriates ............................................... 218
15.2.2 Expatriates from Agency Theory ........................................ 219
15.3 Ethnocentric to Geocentric Phase ................................................... 220
15.4 Alternatives to Expatriates .............................................................. 220
15.4.1 Locally Contracted Non-Japanese Managers ...................... 221
15.4.2 Third-Country Nationals (TCN) ......................................... 222
15.4.3 Frequent Fliers .................................................................... 222
15.5 Japan Connection ............................................................................ 222
15.5.1 Japanese Expatriates Abroad ............................................... 222
15.5.2 Expatriates in Japan ............................................................ 223
15.6 Conclusion ...................................................................................... 225
References ................................................................................................ 226
Index .............................................................................................................. 229