The rise of private capital, including private equity, super funds, sovereign wealth funds and corporate venture capital, has fundamentally reshaped the funding environment and will help refresh M&A activity in the future. Fund managers are allocating more to private capital than ever before in the history of modern capital markets. Many will use private equity as a vehicle to deliver returns, while others will increase direct investment activity.
Despite ongoing global trade and tariff uncertainty, many Japanese companies are still planning cross-border deals, with 20% of executives focusing more on international opportunities, including within the UK, which is the number three destination of M&A choice for executives in Japan. Overall, the top ﬁve investment destinations for executives surveyed are Japan, the US, the UK, China and India.
The fundamental drivers for Japanese companies to complete cross-border M&A remain. Furthermore, many companies are looking to M&A to mitigate the potential impact of trade and tariff policies, secure market access and protect supply chains. All of the top M&A destinations of choice are countries embroiled in trade uncertainties, suggesting that those companies planning deals are actively looking to get ahead of potential geopolitical disruption. Uncertainty is giving some executives pause for M&A thought — and that will likely result in a fall from current deal highs in the next 12 months. However, we can expect higher M&A activity into next year. Portfolio reviews today will yield asset sales in due course. Getting ahead of technological disruption and navigating geopolitical shifts will require M&A. With growing competition for assets among private equity and other private capital, those corporate executives who are opting to wait on the sidelines will likely ﬁnd they are compelled to return to the deal table in 12-18 months' time.