Auto Supplier Consolidation

From the steamy heat of mid-August Osaka, o-hisashiburi (it’s been a while).

Continuing on the consolidation theme, it’s interesting that there don’t appear to be any large Japanese funds buying up companies to drive consolidation. This is happening in the USA and Europe either driven by companies pursuing consolidation as a strategy or by funds assembled for the purpose.

Is this because Japanese management shrewdly recognise the extreme difficulty in achieving real value from M&A activity, because they are simply too risk averse or because they recognise that they lack the breadth of management talent to make cross-border, post-merger integration work?

Probably all of the above.

In the past, this was not a problem. Hanging on to the coat tails of Toyota, Nissan, Honda et al was as good a strategy as any. These days, the rallying cry across Japanese industry is “Globalise or Die”. Easier said than done (the former, that is).

Some deals have taken place (Takata – Petri, NSG – Pilkington), but many more have failed (purchase of FAG, purchase of Karmann, purchase of SKF….) and many have not even got as far as identification of a potential partner/target.

M&A managers in the big Japanese financial institutions complain constantly of the difficulty of getting even as far as due diligence.

Interest remains high despite the problems, but is mainly focused on individual deals.

So should Japan Inc focus on getting more two party deals successfully through to closure or start thinking big and looking at industry consolidation on a global scale?

Let me know what you think.

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