Summit Notebook

Exclusive outtakes from industry leaders

Expect action in Japanese M&A

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After falling off a cliff at the start of this year as the global financial crisis gripped, mergers and acquisitions by Japanese companies overseas are likely to pick up again in the second half of this year, according to boutique Japanese M&A advisory firm Recof Corp.

There won’t be a flood of deals, Recof President Hikari Imai says, but the ones there are, are likely to be chunky as Japanese companies expand their frontiers beyond domestic markets where growth prospects are limited.

Geographically the focus is likely to be Asia — China, India in particular and possibly the Philippines or Australia. And the types of companies looking abroad will broaden as well, Imai told the Reuters Japan Investment Summit.

Recof expects Japanese power utilities, paper, food and beverage and retailing firms to look abroad at markets where they can put their advanced technology and inventory control systems to use.

Independent in appearance

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Japan is edging towards the introduction of independent directors and auditors for publicly listed companies, but so far even the idea of having someone from outside at the top of a company remains a foreign concept.

The tradition is for someone to join a Japanese company at age 22 with the ultimate goal of serving on the company board, says Takeyuki Ishida, the head of Japan Research at RiskMetrics Group, which advises institutional investors on how to vote their shares.

Asia still a wealth of wealth players

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A few years ago, domestic and international financial players were chomping at the bit to lure Mrs. Watanabe’s millions of yen or fellow Asians’ yuan, won or dollar holdings from their futons or equal-interest savings accounts.

The global financial crisis in the last year has sparked a rejigging of foreign institutions’ expectations about Asian wealth and their own ability to attract it, with some opting out of the game altogether.

Signs of life in Japanese private equity

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The conventional wisdom is that private equity is comatose in Japan, at best, with some major firms leaving Tokyo, deal numbers sliding and even old Japan hands like Advantage Partners seen as looking to exit mature investments.

Yet Richard Folsom, Representative Partner of Advantage, tells a very different story with deals in the pipeline, finance on tap and some ripe fruit about to be picked — even if his firm has yet to announce a new investment deal this year.

Nikkei recessive exuberance

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If the Nikkei’s spring rally from multi-decade lows whet appetites for a “Japan is back” soaring benchmark, it’s time to check that excessive exuberance, says Deutsche Securities’ Naoki Kamiyama, who sees a top of 10,500 yen for the Nikkei 225 and 1,000 for the Topix over the next year.

No one was expecting a return to 30,000 or even 20,000 for the Nikkei, which has found upside tough after a recent crack above the 10,000 line. But the veteran of many years of Japan asset-watching says market optimism is now meeting reality, with gains of less than 10 percent from current levels likely.

Investing Japan, as Japan invests offshore

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Even in the best of times, Japan has never been a cakewalk for foreign investors. But in the wake of the global credit crisis, the world’s second-largest economy can be downright baffling.

The recession has wiped out overseas demand for electronics and automobiles and sent a rush of mid-sized firms into bankruptcy.

AUDIO – Real estate’s ugly confluence

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All week, we have been meeting real estate executives at Reuters Global Real Estate Summit who have discussed the many different areas of concern that have spread throughout the sector.

Some have spoken about deleveraging. Some have told us about the shrinking of values. Others have said it’s a confidence game — as in, there isn’t any.

Smaller cities’ real estate to stall- what are your town’s prospects?

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New York and a handful of other major U.S. cities are down, but will never be out as far as their commercial real estate goes, a leading New York real estate private equity investor said Monday at the Reuters Global Real Estate Summit.

“New York’s not going away- it’s THE global city.”

Second tier cities are another matter entirely, said Thomas Shapiro, president of GoldenTree InSite Partners. “We are a big believer in the big city theory which is that the bigger cities will continue do better, to the detriment of secondary cities.”

AUDIO – A new emerging market for real estate

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Remember the good old days where — if you lived in the United States anyway — people would talk about “emerging markets”?

We’d nod our heads knowingly, wishing these poor folks the best as they tried to accumulate the swell things we had bought for ourselves. We knew that residents of Mumbai or Caracas or somewhere would never attain the great things we had in such abundance here in the good old USA (Hummers; his and hers monogrammed dishtowels; zero down, 110% mortgages on houses we couldn’t afford … that kind of stuff), but we still wished them well.

AUDIO – ‘Off to the Outlets’ — A new real estate mantra

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When it comes to shopping for bargains these days, retailers are expanding their window of possibilities the same way as increasingly price-conscious consumers.

While the concept of outlet malls and shopping centers was once considered a last-ditch way to unload excess inventory, Steven Tanger, chief executive at Tanger Outlet Centers, says the model is changing…and fast!

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