Japan Inc. Buying Into Tech

As Japan Inc. increases its divestment of legacy businesses, a new appetite for overseas tech firms is emerging.

Everyone wants to be a tech firm these days, and Japanese corporations are no exception. In a massive restructuring to increase their global competitiveness in digital products and services, these businesses are selling off underperforming and legacy divisions and subsidiaries and going on a global shopping spree for tech companies.

In April, Hitachi was reported to be in talks with a consortium of investment funds led by Bain Capital to sell off its metals unit, Hitachi Metals, for around $7 billion. Seeking to transform into an IT-focused company, Hitachi acquired US digital engineering provider GlobalLogic for $9 billion in March.

Earlier, in December 2020, Fujitsu announced plans to increase its mergers and acquisitions activities via a $5.8 billion acquisition push. The Japanese conglomerate expressed a desire to acquire around 20 target companies, with the announcement coming in the wake of efforts to sell parts of its mobile phone and PC units.

In 2018, Fujitsu offloaded its PC division, Fujitsu Client Computing, to Chinese multinational technology company Lenovo, which gained a 51% stake in the unit as a result of the $224 million joint venture.

At the time, Fujitsu also sold off its mobile phone unit, Fujitsu Connected Technologies, to Tokyo-based private-equity firm Polaris Capital Group, which gained a controlling stake in the new entity formed following the deal. Fujitsu was to retain a 30% stake in the offloaded mobile business.

As Japan Inc. increases its divestment of legacy businesses, a new appetite for overseas firms is emerging. In the second quarter, outbound M&A by Japanese firms increased sixfold from its lowest point from a year earlier, according to the Nikkei in July.

Between April and June, Japanese corporations recorded some 182 deals, a 56% increase over the previous year, with sales totaling $19 billion, an increase of 455%, according to data from M&A consultancy Recof.

In addition to Hitachi’s acquisition, noteworthy acquisitions included Panasonic’s $7.1 billion bid to acquire US-based supply-chain management firm and consultancy Blue Yonder. That was Panasonic’s largest foreign acquisition target in over a decade.