Beyond Anglo-American Models: Japan's Unique Approach to M&A and Its Impact on Shareholder Activism and Sustainability

Japan has been evolving its M&A laws, charting a course distinct from that of the US and European models. First, whether an M&A is "good" or "bad" is evaluated by whether it enhances corporate value rather than solely on the acquisition price paid to shareholders. Second, although poison pills are available in Japan, triggering them by the board of directors alone is likely to be enjoined by the courts, whereas shareholder approval significantly reduces the likelihood of such injunctions. This reflects the development of a case law principle that respects shareholder intent. However, given that shareholders are more likely to support acquisitions that offer higher prices, there is a question of whether the case law principle is consistent with the aforementioned corporate value standard. Third, partial tender offers are available.

This study makes three points. First, respecting shareholders’ intent may result in the highest purchase price offer, which may not maximize corporate value. However, this tension does not support rules that permit boards to trigger poison pills without shareholder approval, even if shareholders do not necessarily support corporate value-maximizing takeovers. Second, based on empirical analysis, this study argues that partial tender offers in Japan tend to be beneficial rather than detrimental, thus justifying their allowance. Third, Japanese law is unlikely to permit anti-activist pills like those adopted in the United States, with lower triggering thresholds of 5% to 10%, as such activists’ shareholdings do not necessarily damage corporate value. Regarding sustainability management, factors not reflected in corporate values cannot justify directors' actions under corporate takeover laws. If sustainability management is to be encouraged, mandatory laws and regulations are necessary because the current frameworks provide insufficient motivation to directors.