Outbound cross-border M&A deals by Japanese companies had a record year in 2008 in total deal value, surpassing domestic M&A activity for the first time, according to mergermarket, the independent M&A intelligence provider.

The mergermarket Japanese M&A round up 2008 released reports that overall M&A activity in the Japanese market decline by 35.8% by value, decreasing from US$94.3bn to US$60.5bn in 2008. The number of announced transactions also dropped from 439 to 380, with only 64 deals recorded during the last quarter of 2008, the lowest level in the last three years. The trend in Japan is similar to global M&A activity trend, which fell by 31% by value to US$2.5tr and 20% by volume to just above 12,200 transactions.

Focusing on acquisitions by Japanese companies, however, shows a different picture when the outbound and domestic acquisitions are combined. Total value has increased from US$89.4bn in 2007 to US$114.8bn in 2008, showing that Japanese companies have not lost interest in an expansive strategy through M&A. US$61.1bn was spent overseas to acquire stakes in non-Japanese companies, making up 53.2% of the total deal value of acquisitions by Japanese companies in 2008. mergermarket data shows that this is the first time the total value of overseas acquisitions has surpassed that of domestic acquisitions.

The report also shows the league tables of M&A financial advisors 2008. Nomura Holdings provided financial advice on 69 deals valued at US$ 41.1bn, retaining the top spot of the financial advisor rankings, both by value and volume. Other domestic players such as Mitsubishi UFJ Securities, Daiwa Securities, and Mizuho Financial Group have dominated the ranking by volume, but they are overtaken in the value ranking by Goldman Sachs, Morgan Stanley and Merrill Lynch, which tended to advise on the large bracket deals.

To stop the economic downturn and support the growth of companies, it seems imperative that the government sends a signal to welcome foreign investment. With an expected government change in the near future, the discussion over foreign investment is likely to pick up again in 2009, the report says.