Some Recent Cases of Shareholder Activism in Japan

Japan now ranks second globally in terms of shareholder activism. Recent legal and corporate governance reform, the existence of persistently undervalued companies—characterized by a low price-to-book ratio (PBR) and caused by a weak yen—and the rising influence of institutional investors as well as proxy advisers have catalyzed both global and domestic activists.

In this paper, four case studies illustrate how recent activities shape and influence mergers and acquisitions in Japan, providing examples of: (i) extracting hidden value of real estate value (Fuji Soft), (ii) extracting hidden value of listed subsidiaries or affiliates (Sun Electronics), (iii) responding to diligence and filing hurdles in unsolicited approaches (Tohokushinsha/3D), and (iv) private equity sponsoring as a means of fending off activists (Trancom).

Cases of shareholder activism in Japan are no longer the outlier and are instead becoming part of the norm, with diverse patterns emerging. Japanese boards are learning to navigate this space with new tools, from partnering with white knights to adopting anti-takeover measures.