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Buy-outs

  • Appropriate point of development

    • Only major branded firms can do M&As from get-go

    • Japanese very concerned about continuity and feasibility of takeover

    • However, SMEs can do with local third partner or after 3-5 year familiarization

  • M&As heating up – timing is right

    • Nikkei survey says M&A investments up 66% to 33.6 billion yen FY2006

    • Triangular mergers possible using HQ stock, but debt is still preferred

  • Financing Sources

    • Same VC/PE firms as before

    • Some foreign facing banks (Japan Development Bank, Shinsei)

  • Methods

    • Financing costs still low in Japan 3-6% for smaller buy-outs

    • Can be financed out of cash flow of target if appropriate (3-4 year amortization)

    • LC issued by HQ, lending from Japanese subsidiary making buy-out

  • More on M&A methods later

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