M&As and Corporate Performance in Japan: Transferring vs. Sharing of Control Right

Abstract

Since the beginning of the 2000s, corporate reorganization through business unit transfer, corporate breakup and M&A has become significantly more active in Japan. Business unit transfers took place frequently in both low-growth industry and R&D-intensive industry. On average, the seller companies are more R&D-intensive than the buyer companies. M&A took place frequently in insurance/securities/banking, air/sea transport, paper/pulp, petroleum and cement industries. In many cases, they were triggered by the changes in competitive conditions due to deregulation or by worsening financial performance. M&As increased the sales growth and the profitability of companies, other than in the cases of the mergers of equals. The mergers of equals brought about the decline of sales growth almost equally as the decline of employment growth. These results indicate that, while there are potential benefits of integration through a M&A, it is not easy to materialize the benefits in the case of a merger of equals where the control right is shared. A strong incentive for the management to enhance the corporate performance may Be needed in such a merger.