STOCKS | Goldman Sachs Says Japan’s M&A Activity Is Still in an Early Stage

Japan’s corporate acquisitions and private equity activity are still at an “early stage,” and the country’s stock market has favorable conditions for consolidation, Goldman Sachs said. According to Jin10, Xu Mingyin, head of Asia direct investment at Goldman Sachs, said on Thursday that Japan, South Korea, and Australia offer the strongest profit potential for M&A or privatization deals in Asia because their economies are stable and their companies are relatively large. She said foreign private equity firms have become increasingly active in Japan over the past three years, particularly as changes to corporate governance rules have increased pressure on companies and boards to improve investor returns. Xu said Japan has 4,000 listed companies, compared with about 5,000 in the United States, while the U.S. economy is six times the size of Japan’s. By contrast, Germany, which she described as similar in size to Japan, has only about 400 listed companies, indicating Japan has a notably high number of listed firms. She added that Japan has more than 1,000 companies with annual revenue exceeding $1 billion, which she said is highly attractive to foreign private equity buyers. Xu said the appropriate number of listed companies in Japan remains open to debate, but the market is only just entering the early stage of this process.