David Ibison of the Financial Times recently authored this excellent piece reminding us that there is more to the Livedoor debacle than the superficial observation that “the nail that sticks up gets hammered down.”
Junichiro Koizumi, Japan’s prime minister, dropped a pledge to quadruple foreign direct investment into Japan by 2011 from his annual policy speech last month…His speech was originally written to say that his government would aim to increase FDI to Y26,400bn ($225bn) by promoting the acquisition of Japanese businesses.
The key phrase here is acquisitions.
Why? Consider the title of a report issued last July by the U.S.-Japan Business Council: “Expanding FDI in Japan: M&A is the Key.”
[The report] said Japan still needed to introduce bold reforms, especially by promoting cross-border M&A, and was concerned that some politicians and the media regarded takeover attempts by foreign companies in Japan as hostile.
If the association between takeover attempts and “hostile” hadn’t already been made for said politicians and the media, Livedoor’s behavior during the past year – and the past few weeks in particular – should have made things crystal clear in their minds.
The association between takeover attempts by foreigners and “hostile” hardly needed further (or any) evidence to these people.
And now, with Koizumi’s speech, the pressure appears to have reached the highest levels of government. As Adamu said to me in an earlier conversation this afternoon, “Horie seems to have single-handedly (and perhaps literally) set back the cause of FDI in Japan 5 years.”
The sad part about this whole affair is the mistaken, but deliberate conflation of Livedoor-style M&As, which seem to have had very little to do with improving efficiency or productivity, and M&As in general, which can have substantial benefits not only for the companies involved, but for national economies as a whole.
For many, Livedoor will become the “wanted poster child” for M&As in Japan. And in the long-run, that’s only going to hurt Japan.