Negotiation, deal structure and closing

M&A Negotiations in Japan: thorough preparations are essential. We have experienced many cases, where foreign negotiation teams are much less well prepared for negotiations with Japanese teams (and of course vice versa).

Expect the Japanese side to be excellently prepared. Depending on the case and stage of negotiations, legal department, intellectual property department, and several other specialists may join. Make sure you are prepared.

Timing: negotiations may stretch over considerable time periods. You need to keep reliable response rhythm. Note that excellent Japanese corporations measure “fast response” in terms of hours or days, not in weeks. “Rhythm” and “fast response” is culturally dependent. In some countries “fast response” can mean “in a week or two”, in Japanese top tier business usually it means today or tomorrow.

We have seen many situations where one side assumed that the other side meant “no”, while we found this presumed “no” was straightforard to overcome.

We have experience in many cases, where with our experience in Japan could overcome an initial “no” by clarifying the underlying causes for the “no” on the Japanese side, adjusting our clients position.

Body language, verbal and non-verbal clues, ways to say “yes, “no”, or “very difficult”, are very different in different cultures.

PS: don’t believe people who tell you that Japanese people cannot say “no” – Japanese people can and do say “no”, sometimes directly, sometimes indirectly.

Keep in mind that your objective is not “agreement” or “yes” or signing a beautifully crafted contract, but your objective is to actually implement the business plan successfully, e.g. acquire a business, or form a joint-venture, and then manage the resulting business over the long term and make it grow.

Especially in Japan, a “yes”, an “agreement”, or even a carefully crafted and signed contract is only the beginning of a relationship or a business.

And, don’t forget, in Japan “hai” “はい” does not mean agreement, it only means that your Japanese partner has heard what you said.

We have at least 25 years experience negotiating in Japan, and our CEO, Gerhard Fasol, negotiates with Japanese business partners almost every day for 25 years, including several years of Board Director and Supervisory & Audit Committee work at a stock market listed Japanese corporation.

Here an example from our work. In our due diligence on the distributor relationships for a European client, we found out that their major Japanese distributor had stopped distributing about one year previously, and the CEO of our European client company did not even now about this broken relationship. The CEOs reply was to send us a beautifully crafted and signed 50 page contract as a pdf-file, saying “they must distribute our products – they have signed our distribution agreement. In theory this is true. Practically speaking however, you’ll find it impossible to force a distributor to distribute, who does not want to distribute.

The solution is to find out the reasons why this distributor stopped the relationship, and also the reasons why this CEO did not know about the broken relationship, and fix the relationship – and thats what we assisted the CEO of our client to do.

Crafting a suitable deal structure can make or break negotiations. In many cases the best structure for an acquisition in Japan is different than the optimum in other countries – its case by case.

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1. M&A process
2. Understand the industry: research
3. Find and approach partners
4. Build cooperation
5. Stakeholders
6. Due diligence
7. Finance
8. Negotiate and close agreements
9. Post merger
10. Sale of a company by auction in Japan, or cross-border

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