Bridging the Differences on Cross - border Deals in Japan
Steve Kusumi
Partner, McLagan
Jaidev Murti
Regional Client Development Lead,
Aon Strategic Advisors and
Transaction Solutions
M&A activity is challenging at the best of times. Various statistics point to the fact that less than 30% of deals truly achieve deal goals at the quantum originally planned and in the timeframe originally envisaged. On adding the complications that are inherent in carrying out a cross-border deal, it is easy to understand why so few companies can effectively realize value in such a transaction. While there is a significant set of examples of Western companies investing in Asia, the quantum of investment in Asia's most mature economy Japan still lags.
Much of this lack of inbound activity might be attributed to economic and demographic reasons, such as the strength of the Yen making it less attractive for a foreign acquirer, or the stronger motivation for Japanese firms to expand overseas to counteract shrinking domestic market potential on the back of an aging and diminishing population. However, given the cyclicality of economics and some emerging hope related to policies being driven by the government under the leadership of Prime Minister Abe to revitalize the Japanese market (at the very least weakening the Yen), it is possible that there will be a resurgence of foreign investment in Japan.
Based on our past experiences, we would like to take the next few paragraphs to touch on the people-factor challenges of integration that such acquiring firms may wish to consider in order to enhance their chances of realizing a successful outcome.The differences that create issues in the integration of these organizations can often be characterized around three main pillars:
- Decision-making styles
- Communication challenges
- Cultural acceptance
Decision-making Styles
Naturally, the above factors manifest themselves a little differently, depending on the relative situations of the buyer and the seller. Much has been written about the differences in decision-making styles between companies in the West and Japan, with the general consensus that there is greater respect for the ability to be decisive in the Western context. This is not to say that the seeking of consensus assumes less importance, but the ability to motivate a team quickly towards a decision is perhaps as important and implies clarity in thought process. Furthermore, in cases of impasse, the ability to set a direction quickly from a top leadership perspective and have the fortitude to stand behind the decision as being right for the joint enterprise is equally valued.The oft-quoted success of the Renault-Nissan operation has largely been attributed to the visionary leadership of Carlos Ghosn, who enjoys near legendary status in Japan. This was cemented when early into the deal he saw to it that he met with the senior management at Nissan and made certain that he clearly articulated his vision, showed decisiveness on strategic direction, and walked the talk by agreeing to step down if the decision proved misguided and did not deliver the results that he was committing to deliver. Such commitment to the decision quickly earned the respect of his Japanese team and reduced the more generally held view of leaders who have been parachuted in having no stake in the game.
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