Finsbury 12 Jul 2017 // 3:24PM GMT
Japanese corporates have a compelling opportunity to take a proactive approach to cross-border M&A in 2017.
Strong push and pull factors are at play: the weakening dollar and euro against the yen, an aging domestic workforce and still-sluggish domestic economy, a boom in available assets, and more than $3 trillion in cash on hand are all powerful reasons for companies in Japan to look overseas for acquisition targets.
As Japanese companies pursue international acquisitions, they need to broaden their messaging beyond the pricing, capitalization and terms. There are four strategic communications criteria for Japanese companies to consider when investing into Western companies:
- Take a Globally-Integrated, Locally-Nuanced Approach to Communicating the Deal – In today’s media and social media landscape, news travels faster than ever across borders. It is imperative that Japanese management teams communicate an overarching strategic rationale across multiple markets, while simultaneously taking into account local sensitivities and norms in outreach to stakeholders on the ground. Identifying and targeting the local journalists, editors, investors, influencers, government officials and others who will shape the outcome of the transaction should be a top priority for Japanese companies looking to invest abroad.
- Proactively Involve Key Influencers in the Deal Process – Securing the early support of key influencers, particularly in the political realm, is critical to overcoming the misperceptions that are often attached to foreign buyers in local media, and to placating any stakeholders who fear the transaction may have adverse economic, security, cultural or political effects locally. For example, part of the success inherent in the SoftBank acquisition of Arm Holdings, the first post-Brexit foreign acquisition, was the decision to notify U.K. Prime Minister Theresa May and Chancellor of the Exchequer Philip Hammond a day before the announcement and to commit to growing the Arm workforce in the U.K. This is especially important given the recent rise in protectionist sentiment in Western markets.
- Communicate Early and Often to Employees on Both Sides – As the fight for talent in the U.S., U.K. and Europe intensifies, it is critical for acquiring companies to communicate why the combined entity will be a better place to work for all employees. Accordingly, Japanese executives must be vocal in their discussions, both internally and externally, of corporate values, strategies, and management policies to retain their best talent and to ensure those employees who join as a result of an acquisition are loyal and motivated.
- Utilize New Communications Tools to Tailor Different Messages to Different Audiences – Japanese management teams should feel comfortable communicating the key highlights and strategic rationale of the deal using digital and social media platforms, as well as traditional media, to reach all of their audiences (especially journalists).
When Japanese corporates communicate clearly, openly and often, they have a better chance of securing the support of key stakeholders, which will determine the success of any transaction long past closing. Failing to do so can have equally consequential ramifications. Acquisitions could be derailed by political fallout or local investor backlash before completion, and those that do go through may face a series of setbacks: retention becomes more difficult, outside investors are less patient with a real or perceived inability to secure the financial benefits of the tie-up, and deep structural issues can build over time that fundamentally jeopardize the long-term wellbeing of the company (see Toshiba’s failed acquisition of Westinghouse as a good example).
In Japanese business, there remain cultural and organizational forces that mitigate a consistent global approach to communications. Communicating deals using an integrated, strategic approach that overcomes these obstacles is a critical component of ensuring a successful transaction.
By Kyota Narimatsu, Co-President of Finsbury Japan, which is based in Tokyo.
 Reuters, In 2017 global dealmaking, is the force with Japan Inc? (December 28, 2016)