the classic V-shape, rather than the U-shaped recession
that the US has encountered,’ says Kenneth Siegel, the
managing partner of Morrison & Foerster’s Tokyo based
team. ‘Specifically, because (1) there was much less new
leverage built into the market here over the last 5 years
(much less structured financing), and ( 2) a higher percentage of the economy is tied to strong local
economies like China, there was a more limited off, and
the limited fall was more quickly reversed. Demand
today is back above 2008 levels.’
BUSINESS IMPACT
Some sectors have suffered more than others. ‘Debt
finance and leveraged buy-outs/investments were inactive,’ comments Masanori Sato. ‘J-REIT and other real
estate investment/finance transactions also continued
to suffer from downturns, which reflected the sluggishness of the Japanese real estate market. On the other
hand, equity finance by blue-chip Japanese companies
surged despite the current market conditions.
Manufacturers whose capital suffered substantial damages as a result of the recent sluggishness and/or banks
who are under the BIS regulations embarked upon equity finance in an attempt to reinforce their capital base.’
‘Domestically, there has been some consolidation
style M&A, but on the cross border front in the last 12
months the volume of ‘inbound’ M&A has pretty much
dried up,’ comments Lewis. ‘However, the strength of
the Yen and the cash reserves of many Japanese companies have increased the number of companies looking at ‘outbound’ M&A opportunities.’ Due to the traditionally cautious nature of Japanese companies and
their smaller appetite for taking risks, a number of these
deals have been slow to progress. ‘However, as we have
seen in our own deal flow, a number of significant overseas acquisitions are progressing, covering both private
company acquisitions and, relatively unusually for the
Japanese, public acquisitions in Europe and Asia,’ he
adds.
‘The global financial crisis prompted struggling global financial institutions to dispose of their investments,
including shares in their Japanese subsidiaries/affiliates,
in their efforts to restructure their global (and local)
businesses,’ says Masanori Sato. Those deals include the
capital injections by Mitsubishi-Tokyo UFJ Group into
Morgan Stanley, sales by Citigroup of Nikko Cordial and
Nikko Asset Management and the alliance between
Sumitomo Trust and Chuo Mitsui Trust.
It goes without saying that bankruptcy and restruc-
turing practices continued to thrive.
‘We have continued to see very strong demand in all
aspects of our Intellectual Property practice, from
patent analysis and filings, to complex licensing to litigation,’ comments Siegel. ‘We have over 30 lawyers in
Japan, and they have all been well over-budget for the
last 12 and 24 months. We saw substantially less activity in real estate and capital markets last year, but even
those practice areas have started to come back.’
LOOKING AHEAD
The future is hard to predict, and generally lawyers at
the best firms in Tokyo remain cautious about 2010.
‘Judging from recent months, prospects for the
Japanese economy appears bleak, though some say that
things will not be so bad, pointing to the continuous
economic growth in Asian countries and chances for
new businesses (which may be created by virtue of
Japanese state-of-the-art scientific techniques and
know-how),’ says Masanori Sato. It seems there is
apprehension amongst market participants regarding
the direction of the Japanese economy and how it will
perform under the initiatives of the newly elected
Democratic Party-led government. ‘Some anticipate
that the Japanese economy will undergo a ‘second’
downturn in the year ahead, predicting that the general instability we saw in 2009 will continue into 2010,’ he
concludes.
The future is hard to predict, and generally
lawyers at the best firms in Tokyo remain
cautious about 2010.
‘My feeling is that it should be busy, at least for the
next 2 quarters, although everyone remains very con-
cerned about the potential adverse impact if the US
were to suffer a new reversal,’ says MoFo’s Siegel.
‘If global market conditions continue to recover in
the same way as they have begun to show signs of
doing, we anticipate the main trends of the last 12
months to continue in 2010,’ says Lewis. ‘If the Yen
remains strong, the main opportunities for Japanese
companies will remain with overseas investments and
acquisitions, with Japanese companies looking to take
advantage of what could be considered relatively cheap
acquisitions or investments.’
Only one thing is sure: 2010/2011 will be a year
when Japanese companies continue to focus on return-
ing to profitability. O
