JAPAN Trends and Developments Contributed by: Shuichi Nishimura, Yasuhiro Kasahara and Yoshitaka Kato, Nagashima Ohno & Tsunematsu
As many private equity funds have actively acquired shares in listed target companies for the last few years, these amendments will be relevant to private equity funds for their public deals. Hostile Takeovers and Guidelines for Corporate Takeovers Hostile acquisitions were long considered taboo in Japan. However, the number of hostile transactions has risen since 2019, and some have concluded suc - cessfully for the acquirer. Consistent with this trend, the Guidelines for Corpo - rate Takeovers published by the Ministry of Economy, Trade and Industry on 31 August 2023 are playing a role in further increasing the number of hostile and unsolicited M&A transactions. The purpose of these new Guidelines is to present principles and best prac - tices that should be used throughout the business world to develop fair rules regarding M&A transac - tions. The Guidelines encourage more M&A activity targeting listed companies in Japan as they require, among other things, the boards of directors of target companies to give sincere consideration to bona fide takeover offers. The Guidelines renamed such trans - action from a hostile takeover to unsolicited offer to focus on the process of such transaction and to indi - cate a more neutral stance. As described above, there are some cases where a private equity fund made an unsolicited acquisition offer to a target company subject to the approval of such offer from the target’s board of directors. As private equity funds generally place a high value on maintaining friendly relationships with the target com - pany, we may see this type of unsolicited offer from private equity funds in coming years. Previously, in response to hostile acquisition bids, some target companies attempted to introduce “poi - son pill”-type defence measures, the validity of which was disputed before the courts. The courts tended to support the validity of such defence measures if the shareholders’ meeting had approved the imple - mentation thereof. In 2025, Makino Milling Machine Co., Ltd. introduced a poison pill against unsolicited
offer by Nidec Corporation to secure more time to allow Makino to seek for a white knight. Such poison pill was approved by the Tokyo District Court. How - ever, given that poison pills are not a perfect defence measure, the increasing number of activities by activ - ist shareholders or unsolicited offers could potentially induce other types of acquisition investments by pri - vate equity funds, such as acquisitions as a “white knight”. Shareholder Activism The presence of activist shareholders in Japan is grow - ing. They are increasingly making various demands of the listed companies in which they hold shares (including dialogue with management), and often sub - mit proposals and dramatically express opposition to company proposals at general shareholders’ meet - ings. In particular, activist shareholders tend to target companies with a low PBR (price-to-book ratio). In the context of M&A, there have been several recent instances where activist shareholders intervened in M&A deals for listed companies by announcing their opinion that the purchase price was too low or by buying up the target company shares themselves, resulting in the share price in the market exceed - ing the tender offer price and the tender offer being unsuccessful (such cases have also included MBO deals by private equity funds). Therefore, in going- private transactions by listed companies, especially in MBO transactions, it is necessary to fully consider the appropriateness of the price and the possibility of intervention by activist shareholders before proceed - ing with the transaction. In this regard, it should be noted that the Tokyo Stock Exchange has tightened its code of conduct applicable to MBO transactions by, among other things, requiring the target company to disclose more detailed information regarding the valuation of target shares made by the target company and its special committee. On the other hand, activists sometimes drove M&A deals by advocating for going-private transactions or divestiture of assets or companies to enhance share - holder value.
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