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Gung-Ho on Mergers April 3, 2007

Posted by Kira in Growth, Merger.

A popular new television show in Japan, called “Vulture”, is about a fictional New York investment fund that buys struggling Japanese companies and imposes harsh American-style management changes. The national broadcaster was surprised to learn that half of the millions of viewers supported the American fund and faulted the Japanese acquisition targets for getting into trouble in the first place.

In Japan, corporate takeovers used to be rare because of the deep cultural aversion to selling one’s company. This was considered a humiliating failure by the founders and owners. There is also a cultural aversion to confrontation. However, with years of slow growth, Japanese companies need to find new ways to increase revenue and profit.

“Japan’s in an M. & A. boom…The thinking has changed here,” says Nobuo Sayama, a professor of management at HitotsubashiUniversity in Tokyo and president of GCA, a merger advisory firm.

There is a new openness in the country’s business culture where takeovers and buyouts are becoming a common business practice. The number of mergers involving Japanese companies as buyers or sellers has more than quadrupled in a decade.

I thought the Japanese would have no interest in the new television show and would hate the American fund for imposing its management style on them. I was surprised to see that the Japanese actually liked the American fund although their style was different culturally. Although M. & A. go against their culture, from a business perspective, I think the Japanese recognized that they have to adapt to the competition or they will be left behind in the global economy.

The U.S. economy is over 2.5 times the size of Japan’s and just last year there were nearly four times the number of mergers in the U.S. compared to Japan. I think that Japan recognizes that in order to grow their economy they need to incorporate M. & A. into a strategic advantage. As we have studied, we know that mergers and acquisitions are extremely challenging and that most of them fail- especially the international M. & A. due to all of the cultural differences.

What do you think would make a merger of this type successful? Are mergers and acquisitions inevitable and simply just an example of Darwin’s survival of the fittest? Do you think that Japan should change their culture for the sake of business? Is it fair to impose American-style management in Japan?



1. breichen - April 4, 2007

I think that it is necessary for Japan to change their “culture” for the sake of business, at least regarding their views on mergers and acquisitions. I think it is important to recognize that in the fast paced world of business, things change–fast. Not only do markets and environments change, but organizations change as well. Sometimes this change is for the better, sometimes it is not. I think that in order for the Japanese economy and Japanese organizations to increase growth that they may need to rethink some of the business practices that rely simply on established and archaic cultural norms.

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