Japan's insular ministries have moved in recent weeks to block several efforts by private equity firms and U.S. companies to acquire ailing Japanese tech counterparts.
NEW YORK – Japan's bureaucracy doesn't like foreign ownership or capital investment in domestic corporations. In the last few months, this aversion has grown more pronounced under the guise of national interest.
The word in Tokyo while I was there last week was that the private equity firm KKR, which appeared to be targeting Japanese chip maker Renesas, initially had its eye on Hitachi. KKR wanted to break up Hitachi and spin out several smaller but profitable companies, which it hoped to "harvest" for big returns.
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However, as a veteran Japan observer and technology consultant put it recently, “Hitachi is like the Emperor in Japan.” No one dares to touch Hitachi. So, KKR switched its focus to struggling Renesas as its investment target.
But KKR’s low-ball effort to acquire Renesas also fell through. The reason is Japanese bureaucrats quickly put together a government fund along with partnerships with about 10 companies – mostly the company's own customers – in a bid to buy Renesas for 200 billion yen ($2.55 billion).
While Japan’s MCU giant has many problems, a key issue was the slow decision-making process at Renesas. Blame squarely rest with Renesas management. The problem was exacerbated by shareholders like Hitachi, NEC and Mitsubishi Electric, who demanded a say in nearly every Renesas decision over the past two years.
The government's bailout plan calls for piling on more “major” shareholders like Toyota, a customer, potentially hanging an even bigger albatross around Renesas’ neck.
More important is the question of whether its customers should also be among it largest shareholders. Automotive customers like Toyota tend to throw their weight around in negotiating prices with chip companies. That throws at least one big customer into direct conflict with Renesas’ need to maximize its margins.
Renesas is merely the latest example of Japan’s aversion to foreign investment. When Olympus was looking for help earlier this year, two foreign companies, not Sony, sought to invest, according to a source in the financial community. Two potential saviors were Samsung and General Electric. Such an investment by Samsung or GE actually makes sense since each company has experience and a significant presence in the medical electronics market.