Having recently undergone significant and painful financial restructuring, Japanese corporations have regained momentum and emerged from the “lost decade” only to face a new set of difficult challenges related to operational restructuring. This restructuring is often being financed primarily by alternative assets, distinct from the previous main bank system. The latest demands of value investors combined with global competition, rapid technological change, and government regulations, require bold and innovative approaches for evolving Japanese companies.
In light of these challenges, the Program on Alternative Investments of the Center on Japanese Economy and Business brought together 12 distinguished corporate leaders in a half day conference to discuss the strategies they have pursued and the dilemmas they have encountered when implementing change.
Session 1 examined the issue of restrengthening the core business by consideration of different impressive restructuring cases. The discussion highlighted the importance of concentrating on core competence, while also noting the considerable difficulties inherent in managing a “selection and concentration” restructuring strategy, often as part of a management buyout (MBO). These difficulties include criteria for defining core and none-core businesses, and achieving terms of restructuring agreeable to those involved. Additionally, successful MBOs require that the investment funds play a constructive role in supporting an objective restructuring plan. Each speaker also addressed the ways in which they prioritize different stakeholders—employees, customers, and shareholders.
Session 2 discussed managing global and mega-mergers as part of a broader strategy for corporate change and growth. Speakers explained why M&As are attractive when trying to expand and compete in new regional and global markets or secure business in domestic areas that the current company is weak. They stressed it is critical that within the business group there exists an overall strategic integrated business system in addition to the strategy of each business unit. Managing issues related to different company cultures is necessary for this integration to be successful; the speakers described there experiences with such.
Session 3 considered the important perspectives of key outside strategic advisors who have been at the forefront of helping Japanese business leaders to evolve their companies in the face of contemporary challenges. The important and growing role of the private equity industry as an agent of change was elucidated, as well as the specific differences between the past restructuring of distressed companies and the present challenge of aiding company growth. The market for takeovers is growing and while this is healthy, defensive measures are too often the main focus of management. Improving corporate governance remains an important issue and there needs to be greater diversity in this respect, specifically to more harmoniously incorporate the views of investors and shareholders into the debate. This is necessary to foster disciplined management.The conference was held at The Palace Hotel in Tokyo, Japan, and was attended by about 130 people.
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