Japan’s M&A market has demonstrated consistent growth, even as a robust global resurgence in M&A activity has yet to materialise. A particularly noteworthy development in the Japanese M&A landscape is the marked increase in unsolicited takeover bids. This trend has been catalysed by the Ministry of Economy, Trade and Industry’s (METI) issuance of the Guidelines for Corporate Takeovers in 2023, as discussed in greater detail below.
There has been a discernible uptick in instances where potential acquirers publicly announce acquisition proposals without prior consultation or agreement with the target company’s board of directors. For example, in August 2024, Canadian convenience store operator Alimentation Couche-Tard publicly proposed a takeover of Seven & i Holdings. In response, the company’s founding family submitted a non-binding acquisition offer, but ultimately abandoned the plan due to insufficient financing.
Japanese corporate attitudes toward unsolicited tender offers also appear to be evolving, with a growing willingness among potential acquirers to pursue such strategies, challenging a longstanding taboo in Japan.
A prominent example emerged in 2024, when Dai-ichi Life, a leading life insurer, launched an unsolicited counter-tender offer for Benefit One, surpassing a prior bid from another Japanese company and successfully completing the transaction.
In a similar vein, Nidec, a major motor maker, made a takeover proposal for Makino Milling Machine in 2024. Despite lacking support from Makino’s board, Nidec announced its intention to commence a tender offer in April 2025. However, Nidec withdrew its bid after the Tokyo District Court denied its petition for a provisional injunction to block Makino’s defensive measures. Makino agreed to a tender offer from MBK Partners to take full control of the company.
Corporate takeovers
Takao Kitano
Partner
Mori Hamada
& Matsumoto
Osaka
Tel: +81 6 6377 9416
Email:
takao.kitano@morihamada.com
In August 2023, the METI published guidelines to establish fair practices and best standards for M&A transactions, promoting sound corporate acquisitions in Japan.
The guidelines articulate a code of conduct for directors and boards of target companies receiving acquisition proposals. Principally, on receipt of a proposal to acquire corporate control, management or directors are expected to promptly submit or report the proposal to the board. When the board receives a “bona fide offer”, defined as a specific, purposeful and feasible acquisition proposal, it is obliged to give such an offer “sincere consideration”.
Should the board resolve to pursue an agreement, it must assess the acquisition’s appropriateness from the standpoint of enhancing corporate value and make reasonable efforts to ensure that the terms of the transaction secure shareholders’ interests.
To enhance transparency, the guidelines emphasise that acquirers should provide shareholders with sufficient information, including the purpose of the acquisition, a summary of the acquiring party and post-acquisition management strategy, and allow sufficient time for informed decision making. Target companies are likewise expected to furnish shareholders with all material information relevant to evaluating the transaction.
The guidelines also address takeover response policies and countermeasures, underscoring the importance of respecting shareholder intent, ensuring necessity and proportionality, prior disclosure, and maintaining dialogue with the capital markets. Consistent with prevailing judicial precedents, the guidelines stress that the invocation of countermeasures based on the takeover response policy should rely on the rational intent of shareholders, since it concerns the corporate control of the company.
Although the guidelines are characterised as “soft law”, setting out principles and best practice rather than binding rules, they are rapidly becoming an integral part of the regulatory framework governing public M&A in Japan. Market participants are well advised to remain cognisant of the guidelines when engaging in public company acquisitions.
Tender offer rules
Concurrently with the formulation of the guidelines, the Financial Services Agency engaged an expert panel to undertake the first major overhaul of the tender offer rules since 2006. The proposed revisions include lowering the threshold for mandatory tender offers and expanding the scope of transactions subject to such requirements.
On 15 May 2024, the National Diet enacted significant amendments to the Financial Instruments and Exchange Act (FIEA), introducing substantial changes to both the tender offer regime and large shareholding reporting requirements. These amendments are scheduled to take effect on 1 May 2026, in principle.
The amendments will lower the threshold for mandatory tender offers from one-third to 30%. The current one-third threshold corresponds to the level at which a shareholder can veto special resolutions (which require a two-thirds majority). The shift to a 30% threshold aligns with international standards and reflects actual voting practices in Japanese listed companies, where a 30% stake is generally sufficient to block special resolutions and can significantly influence ordinary resolutions (which require a simple majority).
Under the current regime, on-market transactions are exempt from mandatory tender offer requirements. However, there have been instances where substantial shareholdings have been rapidly accumulated through on-market purchases. In response to calls for greater transparency, the amendments will bring on-market transactions within the scope of the tender offer regulations, enhancing market fairness and transparency.
The amendments will also abolish the so-called “rapid purchase rule”, which currently requires a mandatory tender offer if an acquirer accumulates more than one-third of shares within three months through a combination of off-market and on-market transactions, preventing circumvention of the tender offer regulations. With on-market transactions now subject to the tender offer regime, this rule will be eliminated.
Large shareholding report
Under the FIEA, any person whose shareholding in a listed company exceeds 5% is generally required to file a large shareholding report within five business days. Certain financial institutions are permitted to utilise a special reporting system, filing only twice monthly.
However, this system is unavailable if the institution is involved in “material proposals” concerning the investee’s business activities. To foster greater engagement between institutional investors and investee companies, the definition of “material proposals” is expected to be clarified in forthcoming enforcement orders and cabinet ordinances.
Proposals concerning the appointment or removal of directors, as well as the disposal of the company’s principal business, among others, are generally expected to be categorised as “material proposals”. This is because such actions typically result in substantial changes to, or exert a significant impact on, the company’s overall business activities.
The amendments also stipulate that, in general, if certain financial institutions do not agree to engage in a “material proposal” but agree to jointly exercise their individual shareholder rights (such as voting rights or other specified rights) at a particular shareholders’ meeting, they will not be required to aggregate their holdings as “joint holders”. This applies to the calculation of shareholding ratios under the relevant regulations.
Direct foreign investment
Foreign investment in Japanese companies is principally governed by the Foreign Exchange and Foreign Trade Act (FEFTA). While the FEFTA upholds the fundamental principle of free-market investment, it imposes a prior notification requirement on foreign investors undertaking certain investments or related actions, such as acquiring 1% or more of the shares in a listed company, or any shares in an unlisted company, where the target operates within sectors designated for heightened scrutiny.
These sectors, designated from the standpoint of national security and public policy objectives, include industries such as weapons, aircraft, nuclear facilities, space, semiconductor manufacturing equipment and storage batteries, among others.
Typically, a 30-day waiting period is mandated following the submission of a prior notification. During this interval, the government reviews the proposed investment and may, at its discretion, expedite the process and grant clearance where no further examination is deemed necessary. Should the authorities identify concerns relating to national security, they are empowered to order changes to, or even the cancellation of, the proposed investment.
Exemptions from the prior notification requirement may be available to foreign investors who satisfy specific criteria, such as refraining from being involved in the management of the target company and from accessing secret non-public technological information. However, such exemptions are not applicable to “core designated business sectors”, a subset of designated business sectors subject to especially rigorous review, unless additional conditions are fulfilled.
Forthcoming amendments to the FEFTA exemption framework will introduce a new category of foreign investors, specifically those obligated to co-operate with foreign governments and required to disclose certain information. These investors will be precluded from utilising the prior notification exemption for investments in designated business sectors.
MORI HAMADA & MATSUMOTO
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4-20 Ofukacho, Kita-ku, Osaka 530-0011,
Japan
Tel: +81 6 6377 9400
Email: info@morihamada.com
www.morihamada.com
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