M&A Activities and the Performance of Target Firms - Comparison of Out-In M&As with In-In M&As

Author Name FUKAO Kyoji  (Faculty Fellow, RIETI / Professor, Institute of Economic Research, Hitotsubashi University) /KWON Hyeog Ug  (Institute of Economic Research, Hitotsubashi University) /TAKIZAWA Miho  (Graduate School of Economics, Hitotsubashi University)
Creation Date/NO. March 2006 06-J-024
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This paper analyzes the effects of Japanese corporate acquisition by foreign and Japanese companies in the manufacturing and wholesale/retail industries, using microdata from the Basic Survey of Japanese Business Structure and Activities. In addition to comparisons by industry, this paper conducts separate analyses of in-in M&As within and across corporate groups.

The main findings can be summarized as follows. (1) Foreign firms tend to select Japanese companies with high labor productivity, high profit rates and high R&D and export intensity as the targets of out-in M&As. After the acquisition, the productivity indices and profit rates of the target firms have improved even further. (2) Japanese firms tend to choose firms with low profit rates, low export intensity and high debt ratios as the targets of in-in M&As. There has been no statistically significant improvement in the productivity indices and profit rates of the target firms after the acquisition. (3) The estimates by industry and comparing domestic acquisitions within and across corporate groups did not yield any substantive findings.