Outbound deals to drive Japan M&A: UBS

By Tony Munroe

TOKYO (Reuters) - Japanese companies buying technology and growth overseas will continue to drive the country's merger and acquisition activity, a leading investment banker said on Wednesday.

Overall M&A activity in Japan fell by 22 percent to $64 billion in the first half of 2008, according to Thomson Reuters data, although overseas acquisitions by Japanese firms looking beyond their sluggish home market nearly tripled to $24 billion, with the pharmaceuticals sector especially active.

"We are seeing a very, very clear trend which is that of outward M&A growth and activity, and that trend isn't just a statistic that may come and go," Steven Thomas, managing director and head of M&A at UBS in Japan, told the Reuters Japan Investment Summit.

Earlier this year, UBS advised Takeda Pharmaceutical Co Ltd Japan's biggest drug maker, in its $8.1 billion deal for U.S. biotech firm Millennium Pharmaceuticals.

The Takeda deal is the largest involving a Japanese company this year and helped UBS climb to second place on the Thomson Reuters M&A advisory league tables for the first half, behind local house Nomura Holdings.

Thomas described the current outbound M&A trend as "a different world" from the bubble economy of the late 1980s, when Japanese companies went on a spree of buying golf courses and other trophy properties at inflated prices.

"It is underpinned by some very, very careful thinking, some very careful planning, and a very clear understanding by many Japanese corporate executives that growth will come through being a leader, hopefully at the global level, and certainly at the Japanese level," he said.

"It will come through being a leader in their chosen industry," added Thomas.  Continued...