You would have recently read in the press of Omaha’s Wise Man, Warren Buffet, taking a $6 billion stake in the five largest Japanese trading houses. This was described as a contrarian bet[2]. Or is it? Is there a reason for smart money to be attracted to Japan at this particular moment? We believe there are several compelling reasons.

Corporate disposals are no longer taboo

Long-standing cultural resistance stood in the way of corporate disposals in Japan – disposing of non-core or under-performing assets was previously seen as somewhat ‘dishonourable’. However, Western private equity firms have largely changed Japanese shareholder sentiment and public opinion on this by delivering large buy-outs successively, from around 2017, demonstrating ways to for the large Japanese corporates to break free of conglomerate discount.

Covid-19 has accelerated this trend, with more Japanese companies than ever reviewing their business portfolios and applying strict management of ROIC in their analysis. Whereas historically, to many boardrooms, maintaining domestic employment across a very diverse portfolio of businesses was more important than enhancing shareholder value – this shift is driving disposal activity and subsequently, the rise of interest from overseas investors in Japanese or Japanese-owned assets.

Unwinding of cross shareholding

Another related Japanese phenomenon unshackling large Japanese corporates from the legacy activity, is the unwinding of cross-shareholding by banks and commercial partners, which once provided stabilities to the Japanese corporates.  This allowed them to make bold investment decisions during the Japanese expansionist era, but acted as deterrent to inbound M&A activities.

In the past 9 years, Japanese cross-shareholding has decreased by 18%, implying that minority stakes in 16,000 related companies had been disposed during this time[3], resulting in M&A deal flows as well as ensuring that capital markets drivers are being driven rationally – without the irrational logic of historic / legacy relationships.

Publicly listed subsidiaries being acquired by the listed parent

There are proportionally 15x[4] more listed subsidiaries on the Japanese stock exchange than in the West, which has long attracted criticism around corporate governance. This phenomenon was perceived as handicapping Japanese groups – so many listed businesses with independent governance requirements meant much less ability to coordinate strategic decision-making at group level.  This new trend of intra-group consolidation will allow Japanese corporates to improve their ROA as well as boosting their M&A firepower.  


In China, we have also recently observed smart money being invested.  As far back as twenty years ago, huge amounts of Western capital had been raised to take advantage of fast growth in the Chinese economy.  The reality, however, was that governance issues and accounting opacity in the Chinese targets led to much of this capital being under-deployed, or resulted in a bitter experience for the Western investors. Today, with the emergence of global technology leaders from China, successful listings of Chinese companies on Hong Kong and overseas markets, and the implementation of increased regulatory transparency, the quality of Chinese investment opportunities has dramatically improved and ‘smart money’ operatives are quickly finding them. 

The setting up of new ‘China funds’ is emerging across global fund managers, with BlackRock, JP Morgan Chase and Vanguard all indicating a shift of interest to the market[5]. London based mid-cap private equity funds are following Wall Street, with Investcorp launching two joint China Funds already, first with Everbright[6] and more recently with China Resources, the consumer conglomerate progressing in the past two years[7]. As another example, demonstrating confidence in the Chinese education / consumer market, Permira has signed an agreement to acquire English First China business for $1.5b in July[8].

Based on the above emerging trend, in both Japan and China, we believe there will be increasing chances for sponsor-backed corporates to find high-quality bolt-on opportunities in the region.

As you will see from the recent notable disposals by the Japanese and Chinese below, there have been many successful inbound deals by the Western strategic investors - including the deals reportedly soon to be in the market. Furthermore, increasing number of Asian sellers are turning to global auctions in addition to seeking bilateral transactions, as opposed to always preferring to do the deal domestically.

Major Japanese disposals 2020 YTD[9]





Size (€m)







Takeda Pharmaceutical

Takeda Consumer Healthcare




(Private placement)

Nippon Paint

Wuthelam Holdings



(Take private)

Nichii Gakkan

Bain Capital





Atlas Holdings




Hitachi Chemical

Showa Denko


Reported major Japanese disposals[10] 


Reported disposal




Toshiba TEC


Firestone Building Products


Hitachi Metals

Japan Post

Toll Holdings


NEC Energy Solutions

Showa Denko

Showa Aluminium Can


Huis Ten Bosch Resort


Sprint USA


Panasonic Automotive

Major Chinese disposals 2020 YTD[11]





Size (€m)


PAG Capital


MiraeN consortium



Trina Solar

1 GW PV project

Matrix Renewables



Wanda Sports Group

The Ironman Group

Advance Publications; Orkila Capital



Beijing Kunlun Tech


San Vicente Acquisition



Haoxiangni Health Food

Hangzhou Haomusi Food



Reported major Chinese disposals[12] 


Reported disposal

China Tianying


Zhejiang Semir Garment


Alibaba Group Holding

ZTO Express

HNA Group

Ingram Micro

Amer Sports; ANTA Sports Products

Suunto Oyj,Precor

Bright Food Group

Miquel Alimentacio Group

China National Chemical Corporation

Syngenta International

Fosun International

Cainiao Network Technology

HNA Group

Hong Kong Airlines

CDIB Capital International Corp

World Fitness Services

Hony Capital

Genworth Financial

CITIC Capital Partners, Blue Sea Capital


Next: Asia vs the West: the economic impact of Covid-19

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[1] Bridgewater wins license to sell investment products in China, The Wall Street Journal, July 2018

[2] Warren Buffett makes $6bn bet on Japanese trading houses, Financial Times, 2020

[3] Japanese Ministry of Economy Trade and Industry,Nikkei Daily,30 September

[4] Page 8, Japanese Ministry of Economy Trade and Industry,Nikkei Daily, 30 September

[5] Why is Wall Street expanding in China?, The Economist, 3 September 2020

[6] Investcorp partners with China Everbright to invest in tech sector, Private Equity News, 6 November 2019

[7] China Resources and Fung Investments launch investment platform targeting Asia food brands sector, Private Equity Wire, 7 November 2019

[8] Permira buys majority stake in EF's children-focused business, Reuters, July 2020

[9] Sourced from public announcements issued by the applicable seller, acquirer or target from 1 Feb 2020 to 30 September 2020

[10] Sourced from publicly released news articles and other public reporting from 1 January 2020 to 15 October 2020

[11] Sourced from public announcements issued by the applicable seller, acquirer or target from 1 Feb 2020 to 30 September 2020

[12] Sourced from publicly released news articles and other public reporting from 1 January 2020 to 15 October 2020