Japan in 'Early Innings' of Corporate Buyout Wave, Says Goldman Sachs Executive

Japan is in the "early innings" of a significant increase in corporate buyouts and private equity activity, according to a senior executive at Goldman Sachs Asset Management. Speaking at the Reuters NEXT Asia event in Singapore, Stephanie Hui highlighted the country's stock market as being well-positioned for a wave of consolidation.

A Market Ripe for Consolidation

Hui argued that Japan has a disproportionately high number of publicly traded companies relative to its economic size, creating substantial opportunities for take-private deals. She attributed this view to a stark contrast with other major economies, noting that Japan has 4,000 listed companies compared to roughly 5,000 in the U.S., which has an economy six times larger.

By comparison, Germany, an economy of a similar size to Japan's, has only 400 listed companies. "You could argue how many listed companies there should be in Japan at the end of the day, but we’re just in the early innings of this process," Hui said. She added that with more than 1,000 Japanese companies generating annual revenue above $1 billion, the market offers many attractive targets for foreign private equity buyers.

Governance Reforms Fueling Deal Flow

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The trend is being accelerated by recent changes in Japanese corporate governance rules, which have increased pressure on company boards to enhance shareholder returns. This regulatory push has made companies more receptive to acquisition offers and strategic restructuring, attracting foreign capital.

Foreign private equity firms have become notably more active in Japan over the past three years. Recent examples of this trend include:

• KKR's pending deal to take chemicals firm Taiyo Holdings private.
• A bidding contest for internet company Kakaku.com, reportedly involving Bain Capital, SoftBank’s LY Corp, and EQT.

Hui stated that this influx of private equity has brought a greater focus on corporate efficiency, shareholder value, and digitalization across the Japanese economy. Along with Japan, she also identified South Korea and Australia as lucrative regions for M&A activity in Asia.