SINGAPORE: Japanese firms went on a buying spree in Singapore and the rest of South-East Asia in 2023, as spending hit levels not seen since 2020.
Market watchers said the deals struck are a direct result of Japanese companies looking overseas for growth as opportunities dwindle in their domestic market.
Singapore has been a beneficiary of this trend, both as a hotspot for deals as well as a springboard for Japanese firms to set foot in the region.
Elaine Tan, a senior analyst at financial data provider LSEG, previously known as Refinitiv, noted that the total value of Japanese merger and acquisition (M&A) activity in Singapore hit US$3bil in 2023, a fourfold increase from 2022.
Japanese M&As in South-East Asia came in at US$6.5bil in 2023, with Singapore capturing 45%, Vietnam accounting for 29.3% and Indonesia for 13.4%.
Notable Singapore deals in 2023 included Japanese acquisitions of financial technology company FinAccel, biotech firm Chitose Bio Evolution and Singapore-based international insurtech Bolttech.
Singapore also bagged one of the largest Japanese M&A deals in South-East Asia in 2023 when insurer Sumitomo Life paid S$1.6bil for a 35.5% stake in insurtech Singapore Life (Singlife) in December.
This followed Sumitomo’s acquisition of Aviva’s 25.9% holding in Singlife in September and a 25% stake that it bought in 2019.
Like other Japanese firms eyeing the region for more growth compared with their stagnant home market, Sumitomo, which intends to make Singlife a wholly owned subsidiary, sees Singapore as a key part of its strategy to grow in South-East Asia.
Tracy Whiriskey, Tokyo-based corporate partner and global co-head of insurance at law firm Linklaters, said Japan’s population is shrinking, so companies must go offshore to look for growth to expand and, in some cases, survive.
Whiriskey added that the cheap Japanese yen is not necessarily a deterrent for these firms because offshore M&As allow them to obtain foreign currency income to hedge their revenue streams.
She also noted that they have “a lot of capital to deploy” and many deals are done on the balance sheet with their own money, without the need to raise finance, so higher interest rates are not a concern.
Sophie Mathur, partner and Asia head of corporate at Linklaters, said India is another attractive market for the Japanese.
She noted that firms are particularly keen on infrastructure projects there, especially in the renewables space, adding: “Singapore is a very good entry point into India.
“When these Japanese companies are investing, they want the Japanese insurers in-country also,” she said
She added that “many of the Japanese insurers have their regional headquarters in Singapore”.
Mathur further noted that many of the companies financing infrastructure development projects across the South-East Asian region are Japanese and have bases in Singapore.
These include Sumitomo Mitsui Banking Corp, Mitsubishi UFJ Financial Group and Mizuho.
“They have very significant project financing capabilities here. That ecosystem play makes this a very credible place for it to be the launching pad for Japanese investment into the rest of Asia,” she added. — The Straits Times/ANN
