JAPAN Trends and Developments Contributed by: Takeshi Iitani, Reid Monroe-Sheridan, Takahito Fujii, Akira Kawashiro and Daisuke Eguchi, southgate
Increased Shareholder Activism Activist shareholders, both domestic and inter - national, are both assertive and influential in the Japanese market. Not only do activist funds cur - rently hold the highest share of Japanese mar - ket capitalisation in the past four years, but they also have a significant impact on financial policy, corporate governance, board composition and corporate structures. The primary drivers of this escalation in activity are overseas funds such as Elliot Investment Management and Oasis Management. From July to December 2024, for instance, Oasis submitted multiple shareholder proposals to three different target companies on topics including marketing strategy, board nominations and director compensation. Activist investors, moreover, have been key advocates of taking companies private and are increasingly adopting approaches more reminiscent of pri - vate equity than traditional shareholder activism, such as directly proposing takeovers — a trend that will likely help to sustain the high number of MBO transactions, takeover bids and overall M&A activity.
rity risk through the potential outflow of domes - tic technology overseas, FEFTA requires foreign investors to file a prior notification before invest - ing in Japanese companies that operate within designated business sectors. An amendment to the related notification of FEFTA announced in September 2024 expanded the list of “core” business sectors, which trigger the greatest gov - ernment scrutiny among “designated” sectors, to include semiconductors and electronic com - ponents. FEFTA may also present an obstacle to hostile takeover bids: Seven & i Holdings sought and received core business sector status under FEFTA to counter Alimentation Couche-Tard’s takeover bid. It remains unclear whether the new designation will affect the outcome of the acquisition proposal. Generally speaking, how - ever, FEFTA filings are much simpler than similar filings in other jurisdictions, such as CFIUS in the United States.
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