Japan to lead boom in Asia restructuring activity - survey

Japan topped a list of Asian countries expected to see the most restructuring this year, according to a survey of 150 bankers, lawyers, GPs, government officials, and other restructuring experts in the region, carried out by advisory firm AlixPartners. Japan was followed by Australia and New Zealand, South Korea, Greater China and Southeast Asia.

"There have been a couple of newer developments [in Japan] and one is regulatory change," Darren Stone, a vice president at AlixPartners in Hong Kong, told AVCJ. "The government is trying to improve corporate governance, and so we have seen the banks and corporates start to unwind some of their cross holdings as well."

Stone added that while there is less foreign PE buyout activity in Japan compared with some other markets, activist investors are putting more pressure on companies to return cash to shareholders and restructure. He cited recent efforts by Dan Leob, founder of US hedge fund Third Point, to get robotics firm Fanus Corp. to pay out to investors.

Overall, the survey showed that 93% of respondents anticipated that the number of corporate restructurings and turnaround situations will increase this year, with around 40% saying the impact from China's slowdown would be the biggest driver.

Of the respondents, 90% said M&A will be the main tactic for restructuring, both in terms of making acquisitions and divesting non-core assets. Stone noted that a lot of restructuring companies, having picked the low-hanging fruit in terms of making cutbacks and improving operations, are now shifting their focus.

"Things like working capital reduction and incremental operational improvements are the sort of things companies should be doing anyway, even healthy companies, so that has been an obvious thing to target," said Stone. "Now people are thinking they need to take more drastic actions and explore a wider range of options."

However, he noted this could also include expansion, especially in a country like Japan where companies face a shrinking population and a declining domestic market. This is forcing more of them to look abroad for new lines of business and growth markets.

In China, meanwhile, a lot of industries are struggling with overcapacity, which is driving a need for consolidation.

"Companies with access to funding - or are listed and have the currency of their rising stock - are well placed to pick up the smaller or weaker players," Stone said. "The other aspect is outbound investment where they have been actively looking at companies in Europe to pick up brands and intellectual property, helped by the weakness of the euro."

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• Topics
• Credit/Special Situations
• North Asia
• Greater China
• Restructuring
• Distress
• Japan
• China
• GPs
• Asia