Activist investors are establishing a long-term presence in Japan, buoyed by recent successes after an initial period of resistance. Firms like U.S.-based Elliott Investment Management have achieved significant wins, demonstrating a shift in strategy as Japanese companies and regulators embrace reform.
This growing activist presence contrasts sharply with past experiences, such as Steel Partners' acquisition challenges two decades ago. "Activism has moderated how it conducts itself," notes Jeremy White, partner at Morrison Foerster in Tokyo. "And the corporates have moderated in large part because of corporate governance reforms, with more independent directors, and an ethos of more accountability to shareholders."
Elliott Investment Management is expanding its Japanese operations, recently disclosing stakes in Daikin and Mitsui OSK Lines. The firm is committed to building its Japan franchise, with plans for further activist campaigns. Their approach has evolved, with public statements and presentations now part of their strategy, a shift from earlier, more discreet tactics.
International investors are following Elliott's lead, attracted by the potential for higher returns. While activists often target smaller companies, Elliott's substantial capital allows them to pursue larger targets. Last year saw a record number of activist campaigns in Japan, driven by government-led corporate reforms, including unwinding cross-shareholdings and share buybacks.
Fundamental factors, such as numerous family-controlled firms with diverging interests from minority shareholders, support continued activist growth. These structures have often led to underutilized assets and poor returns. "Japan will have decades of activism ahead," predicts Toby Rodes, co-founder of Kaname Capital.
However, some experts caution against an overemphasis on short-term profits. "The danger is the arrival of short-termism and financialisation where everything is about short-term profit," warns Ulrike Schaede, professor of Japanese business at UC San Diego. The success of future activist endeavors may depend on a less confrontational, more Japan-attuned approach.