JETRO Invest Japan Report 2025
Chapter2. Trends in Inward FDI to Japan Section5. Cross-Border M&A in Japan

In 2024, cross-border M&A transactions targeting Japan in 2024 reached 208 deals, up 24.6% year-on-year, recovering from the decline in 2023 (Chart 2-18). This increase seems to have been driven by factors such as the yen's depreciation making Japanese companies and assets appear undervalued, improvements in the M&A environment through corporate governance reforms, and inflows of capital from overseas private equity funds. By source country/region, the United States ranked first with 99 deals (accounting for 47.6%), followed by the United Kingdom with 24 deals (11.5%) and Hong Kong with 21 deals (10.1%) (Chart 2-19). Singapore rose significantly from 9 to 16 deals, and Taiwan from 3 to 13 deals, while South Korea declined from 13 to 4 deals.

The total cross-border M&A investment value in Japan over the three-year period from 2022 to 2024 was approximately 7.4 trillion yen, with the top three countries—the United States, Hong Kong, and the United Kingdom—accounting for about 6.1 trillion yen, or 82.6% of the total (Chart 2-20). Looking at trends over consecutive three years on a ten-year interval basis, the total deal value for 2002–2004 stood at approximately 2.2 trillion yen, with the United States alone accounting for 1.8 trillion yen (83.2%) and demonstrating an overwhelming presence. In contrast, the total for 2012–2014 was approximately 1.5 trillion yen, only about 20% of the 2022–2024 figure. This decline reflects the heightened caution toward investments and acquisitions both domestically and internationally, which stems from the global economic slowdown and uncertainty in international financial markets due to European sovereign debt crisis, as well as the disruption of supply chains and deterioration of earnings environment caused by the Great East Japan Earthquake in 2011. Looking at the top countries/regions over this period of over two decades, the United States has consistently maintained its position as the largest investor, but the rankings below have experienced significant fluctuations.

Looking at the acquired companies through cross-border M&A in Japan over the three years from 2022 to 2024 by industry, software and ICT led in the number of deals, with 245 (41.1% of the total), followed by services, with 79 (13.3%) and electric machinery, with 38 (6.4%) (Chart 2-21). The top two sectors were both non-manufacturing, which together accounted for over 50% of the total. Software and ICT also led in transaction value, though its share of the total was just under 20%, lower than its share based on the number of deals (Chart 2-22). By contrast, transportation and warehousing, accounted for 13.0% of the total deal value, far exceeding its 1.2% share on a deal-count basis, indicating that the average investment value per transaction in this sector was relatively large.

M&A transactions in Japan are classified into three categories: domestic transactions involving only Japanese parties (IN-IN), inbound transactions where one party is overseas (OUT-IN), and outbound transactions involving Japanese companies acquiring overseas firms (IN-OUT). Based on the three-year moving averages, the analysis on a value basis (left axis) shows that OUT-IN transactions have exhibited a clear upward trend since around 2015, indicating increased activity in large-scale cross-border M&A and private equity investments. IN-IN transactions have also shown an overall increase in value over the same period, gradually expanding their shares.

On a deal-count basis (right axis), the increase in small-scale transactions, such as SME-to-SME M&A via IN-IN deals, is particularly notable, revealing a structure in which small-sized transactions are driving the overall number of deals. As of 2023, IN-IN transactions accounted for approximately 80% of all M&A deals. Meanwhile, IN-OUT and OUT-IN transactions have remained largely flat, with OUT-IN hovering at roughly 50% of IN-OUT.

When examining trends in the value and number of cross-border M&A transactions targeting Japan, categorized by investment firms and non-investment operating firms and analyzed using a three-year moving average, it is evident that M&A activity by investment firms has shown a steadily upward trajectory in both deal value and deal count since around 2011 (Chapter 2-24). The transaction value increased approximately elevenfold, from 0.2 trillion yen in 2011 to 2.2 trillion yen in 2023, while the number of transactions rose by about 6.6 times, from 18 deals in 2011 to 118 deals in 2023. Since around 2011, this growth has been driven by an increase in large-scale M&A transactions and private equity investments led primarily by U.S. and European investment firms, alongside increasingly active participation by sovereign wealth funds from regions, such as the Middle East and Singapore.

As in 2023, management buyout (MBO) deals led by investment firms stood out as a prominent form of M&A transactions (Chart 2-25). The motives, purposes, and methods of transactions have become increasingly diverse, including the business transfers of York Holdings and Mitsubishi Tanabe Pharma, the prolonged stakeholder alignment required for Fuji Soft's successful TOB, compliance with national security reviews under the Foreign Exchange and Foreign Trade Act for Shibaura Electronics, and capital participation in companies such as Kao, Sanwa Holdings, Tokyo Gas, NEC Networks & System Integration, and Shiseido.