A Surge in Offshore Buyers

By Generational Equity


Over the past few years, analysts have highlighted how offshore buyers have become quite acquisitive of companies based in the U.S. and Canada. Most of the press has focused on Asia, specifically China, so the title of a recent article in Bloomberg Business caught my attention:

Japan Firms Have $890 Billion in Cash. Here's Where They Might Spend It

According to the article:

Japan outmuscled China to dominate mergers and acquisitions in Asia last year, and with companies in possession of more than $890 billion in cash, the spending spree is likely to continue in 2019. Japanese companies announced more than 1,000 offshore acquisitions totaling a record $191 billion last year, eclipsing China for the first time since 2012.

I was amazed to read that last sentence since it seems that China’s acquisition spree has been the talk of the M&A industry over the last few years. However, it is clear that Japan still has the ability and interest to make significant acquisitions of North American companies:

Japanese companies are poised to have the “biggest year ever” in terms of the number of offshore deals, Koichiro Doi, JPMorgan Chase & Co.’s Japan M&A head, said in an interview. The U.S. will be the most sought-after destination, partly because it’s the largest market that’s growing, according to Doi, who said 2018 was the busiest year he’s had in his two-decade-long career.

In fact, at $892 billion, cash and cash equivalents at non-financial companies listed on the Nikkei 225 Stock Average have surged from $690 billion in three years as Bloomberg’s data shows:

Buying Power Japan Offshore M&A

Source: Bloomberg

Note: Cash held at Japanese companies on Jan. 1 excluding financial stocks

How Exciting is this Increase in Offshore Buyers?

The great news for U.S.-based businesses is that increased competition from offshore buyers will only help to keep valuations at the record highs we are enjoying now. And since the U.S., despite its political issues, is still the largest, fastest-growing and most stable economy in the world, the interest of foreign investors should only continue to grow.

The even better news is that Japan represents only one set of potential buyer groups active right now. There are literally dozens of others.

But the immense potential of offshore M&A is only great news if you know how to capitalize on it. Building a buyer ready business, one that commands a premium, does not happen overnight. It takes diligence, hard work, and most importantly, a solid understanding of what buyers want to see in a business like yours (above and beyond profitability and revenue growth).

So, if you are in the position of contemplating an exit in the next 3-5 years, you need to begin your journey today.

A great place to start your educational process on exit planning is at a Generational Equity exit planning conference. Held at locations throughout North America, these meetings are designed to give business owners a basic understanding of how to navigate the M&A waters in a few short hours.

If you are interested in learning more call us at 972-232-1121 or visit our website, leave us your contact info and we will reach out to you for a confidential conversation about your options.

By Carl Doerksen, Director of Corporate Development at Generational Equity.

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