Management Buyouts by Big Companies on Rise

Jiji Press

10:58 JST, January 22, 2024

TOKYO (Jiji Press) — More and more large companies have gone private through management buyouts in Japan amid increasing pressure from investors.

The total value of MBO deals exceeded ¥1.4 trillion in Japan in 2023 to hit a record high, reflecting large-scale deals including Taisho Pharmaceutical Holdings Co., according to Tokyo-based merger and acquisition consulting company Recof Corp.

With shareholders and financial market players stepping up demands, businesses are increasingly beginning to find their responsibility as listed companies burdensome.

In Japan, it has long been believed that the status of a public company makes it easier to win name recognition and credibility and secure human resources and loans.

Over the past few years, however, there have been many clashes between companies’ management and their shareholders. Activist investors call for reforms, such as the sale of unprofitable businesses, and the return of profits to shareholders through dividend hikes and own share buybacks.

Taisho Pharmaceutical Holdings Co. opted for an MBO, concluding that it will be kept under pressure to meet the requests of its shareholders and secure short-term profits as long as it remains listed.

The pressure would likely be a big obstacle to the company’s efforts to achieve medium- to long-term targets, Taisho Pharmaceutical said.

After a series of battles with activist shareholders, Toshiba Corp. went private through a takeover bid by a consortium led by investment fund Japan Industrial Partners Inc.

“Companies’ listing-related burden is rising” partly due to requests from the Tokyo Stock Exchange for action to improve capital efficiency and stock prices, said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co.

He said that MBOs eliminate such burdens, allowing more flexible approaches to business management and structural reforms.

Aoki Super Co., which operates supermarkets in the central Japan prefecture of Aichi, announced the launch of an MBO just days into 2024.

With the financial markets and investors piling requests on listed companies, momentum is expected to build further for MBOs.