* * * * * * * * * T E R R I E 'S T A K E * * * * * * *<br>A weekly roundup of news & information from Terrie Lloyd.<br>(<a href="http://www.terrie.com">http://www.terrie.com</a>)<br><br>General Edition Sunday, October 09, 2011, Issue No. 633<br>
<br>+++ INDEX<br><br>- What's New -- Are We in an M&A Bubble?<br>- News -- Tsunami destruction tour<br>- Candidate Roundup/Vacancies<br>- Upcoming Events<br>- Corrections/Feedback <br>- News Credits<br><br>SUBSCRIBE to, UNSUBSCRIBE from Terrie's Take at:<br>
<a href="http://mailman.japaninc.com/mailman/listinfo/terrie">http://mailman.japaninc.com/mailman/listinfo/terrie</a><br><br>BACK ISSUES<br><a href="http://www.japaninc.com/terries_take">http://www.japaninc.com/terries_take</a>, or,<br>
<a href="http://mailman.japaninc.com/pipermail/terrie/">http://mailman.japaninc.com/pipermail/terrie/</a><br><br><br>-------------- PBXL SUPPORTS SMALL BUSINESS ---------------<br><br>MOVING TO A NEW OFFICE? DON'T BUY A PBX! At PBXL, we <br>
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e-mail us at <a href="mailto:info@pbxl.jp">info@pbxl.jp</a> or call us at 03-4550-2557<br><br>------------- PBXL is BUSINESS COMMUNICATIONS -------------<br><br>+++ WHAT'S NEW<br><br>Over the last 9 months the amount of foreign M&As being <br>
done by Japanese companies has been remarkable, and as we <br>mentioned some weeks ago in TT-627, the amount of deals <br>involved is already 70% above where it was this time last <br>year, at US45bn for the first 7 months. Since most of us <br>
are far removed from the concept of foreign M&As, unless we<br>happen to be working for an acquisitive Japanese firm that <br>requires bilingual skills in order to get promotion, these <br>M&As make for interesting breakfast table reading but are <br>
otherwise ho-hum stuff. After all, the yen is at a record <br>high, so why is it such a surprise? Effectively all of <br>these purchases are coming at a 25% discount compared to <br>where the Yen-Dollar rate will be 12-24 months from now, so<br>
it's no wonder companies are on the prowl. Right?<br><br>But what if there was more to it than that? What if the <br>current M&A trend wasn't a simple outcome of economics but <br>rather was being boosted by government economic policies as<br>
a means to resolve Japan's own problems? Then you'd be <br>looking at the Japanese equivalent of the Chinese solution.<br>The Chinese are using their strong currency to buy up <br>global resources -- they have plenty of internal demand so <br>
this is a good use of cash reserves. The Japanese on the <br>other hand only need as much resources as they can actually<br>store until they manufacture it into something, so the most<br>storable form of future wealth based on currency strength <br>
is either gold, which doesn't produce future revenue flows,<br>or ownership of foreign firms with strong market positions <br>and strong future cash flow. <br><br>This last week, two interesting news items in the financial<br>
press started us thinking that there is something going on <br>behind the scenes that will have big repercussions for <br>Japan and eventually for the man in the street. Both items <br>make us think that the current wave of M&A interest could <br>
quickly become a tsunami, and create yet another bubble <br>that at some stage would have to pop. Further, this bubble <br>comes with some strong risks because of the relatively <br>small size of some of the companies effecting the <br>
takeovers. Small size means less resources to bring to bear<br>if things go wrong. <br><br>[Continued below...]<br><br>-- NAGAMINE & MISHIMA - Securing Your Success in Japan ---<br><br>Starting a new company in Japan? Looking to streamline <br>
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at 03-3581-1975 or by email at <a href="mailto:info@nagamine-mishima.com">info@nagamine-mishima.com</a>.<br><br>---------- YOUR BOTTOM LINE IS OUR TOP PRIORITY------------<br><br>[...Article continues]<br><br>The first announcement came last week when the Japan Bank <br>
for International Cooperation (JBIC) said it had signed <br>agreements with three major private banks to provide them <br>with JPY3.3trn credit lines to be used for foreign <br>takeovers by the banks' Japanese customers. This is part of<br>
a larger US$100bn program announced back in August to get <br>Japanese firms out of yen and in to dollars. <br><br>This amount, along with the half trillion dollars in war <br>chest funds that Japanese listed firms already have socked <br>
away, makes for a potent brew when it comes to leverage for<br>ambitious Japanese firms looking to expand abroad. <br>Companies of all sizes are getting the message that they <br>can start looking at foreign M&As, and the leveraging <br>
involved is quite awe-inspiring -- some Japanese firms are <br>paying 5x-20x on earnings of their targets and borrowing 90%<br>of the acquisition price. Normally these multiples are the <br>domain of venture capital.<br><br>
The second news item was a confirmation of the leveraging <br>available to those firms willing to take the risks. A <br>little known medical testing company called Miraca <br>Holdings, announced this last week that it was taking over <br>
the life sciences arm of a Texas-based firm called Caris. <br>Miraca is a small to mid-sized listed company that does <br>about JPY166bn in revenues, and last year made JPY11bn in <br>net profit. Actually these are pretty good margins for a <br>
Japanese firm. Anyway, Miraca is going to take over the <br>Caris business for the not insignificant sum of US$725m <br>(JPY56bn approx.), the funding of which will be just JPY8bn<br>in cash already held by Miraca, and a bit less than JPY50bn<br>
to be taken on in new bank loans. The amortization of this <br>acquisition will be 20 years -- a long, long stretch even <br>by Japanese standards.<br><br>This is truly impressive leveraging. Looking through the <br>Miraca presentations (they have excellent English-language <br>
materials, which is probably a reflection of the fact that <br>they are 56% owned by foreign investors), we can see that <br>after amortization and bank loan interest costs, there will<br>be almost no free cash flow from the acquisition, based on <br>
today's revenue/profit numbers from Caris. Now, true, the <br>Caris business has a Compound Annual Growth Rate (CAGR) of <br>around 30%, so theoretically the Miraca folks should be <br>well above water in 2-3 years time. But this makes some big<br>
assumptions, such as the fact that healthcare testing in <br>the USA will continue its current torrid pace of growth, <br>and that there won't be either: a) a recession, b) a change<br>of government that de-emphasizes medical spending, or c) <br>
in the USA, the land of litigation, a class action law suit<br>over testing issues that no one has thought about yet. <br><br>Now, the Miraca senior management are not country bumpkins <br>and are not newbies to the foreign market. They have an <br>
impressive track record of previous acquisitions, have a <br>highly successful foreign business called Fujirebio, and <br>their board of directors includes a who's who of former <br>banking and pharma executives who also sit on the boards of<br>
other famous Japanese (and acquisitive) companies. So if we<br>were a Japanese bank weighing up who to give money to, we'd<br>probably pick someone like Miraca. But nonetheless, the <br>previous largest M&A that Miraca had performed was a deal <br>
about 15% the size of the current one, and as yet there are<br>no foreigners on the board of directors at all. So we <br>wonder, just as we wonder for some of these other M&As <br>going on, whether the board and executive management will <br>
be able to meet all the demands that taking over a large <br>foreign business entails.<br><br>Taking a cue from other medical M&As that have happened <br>recently, there appear to be two ways forward that most <br>Japanese firms are taking with a large foreign acquisition.<br>
One is to largely leave the acquired business alone and <br>trust that the local management team there will do the <br>right thing. An insider has told us that this is what <br>Takeda have done with their 2008 US$8.8bn purchase of <br>
Millenium and we understand that to a certain extent this <br>will be Miraca's approach. The other way is to keep things <br>Japanese by bringing in an internationalized Japanese <br>Director with a Stanford or Harvard MBA, to run the <br>
acquired target either in the foreground or background, <br>and this is what Zeria has done with their US$130m Tillotts<br>acquisition in Switzerland made back in 2009. So far, most <br>of the pharma acquisitions made in the last few years are <br>
doing well, but you couldn't say that they have been <br>properly stress tested yet. <br><br>If the Japanese government, and specifically the Ministry <br>of Economy, Trade, and Industry (METI) really thinks that <br>
foreign cash flows into Japanese holding companies is the <br>way of the future, and given the pessimism amongst the <br>Japanese themselves about the decline in their own economy <br>this is understandable, then they need to do more than just<br>
make money available. Thinking into the future, there needs<br>to be a whole support system for these companies who <br>currently might know very little about running a foreign <br>company (Miraca at least does have this experience), and <br>
who when faced with a crisis or adverse circumstances may <br>not be able to react quickly or appropriately enough to <br>address those problems. This support system has to include <br>resources for language, management systems, law, labor <br>
relations, and a host of other issues. <br><br>Also, like all bubbles, there are going to be a number of <br>M&A deals out of this US$43bn which have a high possibility<br>of going bad in the future. Despite their excellent <br>
management track records to date, we would class both the <br>Miraca deal and also Rakuten's massive expansion as <br>high-risk. Actually, the JPY43.3trn is probably going to be<br>a pivot for much larger sums to be spent, and therefore if <br>
things do go poorly, this could put a huge strain on the <br>Japanese banking system. Since these acquisitions are now <br>in foreign jurisdictions, each bankruptcy will be very <br>public and will cause a major loss of investor confidence <br>
in the banking entities behind such deals. We wonder if <br>this is being thought through and if so, what the risk <br>amelioration strategy is going to be? Government <br>guarantees?<br><br>...The information janitors/<br>
<br>***------------------------****-------------------------***<br><br><br><br>--------- BIOS - Bilingual IT Systems and Support ---------<br><br>BiOS full-service IT solutions has a new service.<br><br>Now the largest independently owned bilingual IT support<br>
company in Tokyo, BiOS offers some of the most competitive<br>services available to multinationals whether large or<br>small.<br><br>Data Center staff and managed services, Help Desk, desktop,<br>and network support. Server virtualization, cloud computing<br>
hosting and solutions, general software development. <br><br>For more information on these and other SI and IT services,<br>in English or Japanese:<br><br>Phone: (03) 4588-2220, Email: <a href="mailto:solutions@biosjp.com">solutions@biosjp.com</a><br>
Web: <a href="http://www.biosjp.com">www.biosjp.com</a><br>-----------------------------------------------------------<br><br>+++ NEWS<br><br>- After-hours futures trading by amateurs popular<br>- Sony to buy out Ericsson from cell phone j/v<br>
- Yahoo! getting ready to sell Yahoo! Japan stake<br>- Good growth in LED market<br>- Tsunami destruction tour<br><br><br>-> After-hours futures trading by amateurs popular<br><br>Common wisdom has it that Japan's markets follow those in <br>
the US, and amateur traders are now realizing that instead <br>of waiting until the next morning to move their stock, they<br>can trade in the after-hours markets with stock futures. <br>Apparently the Osaka Securities Exchange (OSE) has futures <br>
trading available from 16:30 pm to 03:am and over the last <br>2 months trading has risen from 20% of daytime trading to <br>37% in August and 38% in September. (Source: TT commentary <br>from <a href="http://e.nikkei.com">e.nikkei.com</a>, Oct 8, 2011)<br>
<br><a href="http://e.nikkei.com/e/ac/tnks/Nni20111007D0710A13.htm">http://e.nikkei.com/e/ac/tnks/Nni20111007D0710A13.htm</a><br><br>-> Sony to buy out Ericsson from cell phone j/v<br><br>Sony is negotiating with its joint venture partner in the <br>
cell phone business to buy our Ericsson's share of the <br>firm. The Sony-Ericsson operation has sales of about <br>EUR6.3bn but a net profit of just EUR90m. ***Ed: We wonder <br>if this is a good move by Sony? Analysts say that Sony is <br>
fed up with Ericsson's slow decision-making and their <br>basic lack of interest in cell phone devices given that it<br>is more an infrastructure company. The problem for Sony is <br>that this business doesn't really make money and with all <br>
the Ericsson patents that have to come with the deal, it <br>will cost Sony dearly.** (Source: TT commentary from <br><a href="http://e.nikkei.com">e.nikkei.com</a>, Oct 7, 2011)<br><br><a href="http://e.nikkei.com/e/ac/tnks/Nni20111006D0610F06.htm">http://e.nikkei.com/e/ac/tnks/Nni20111006D0610F06.htm</a><br>
<br>-> Yahoo! getting ready to sell Yahoo! Japan stake<br><br>Media speculation is that Yahoo! in the USA is seeking <br>advice from the US IRS about how to sell its 35% stake in <br>Yahoo! Japan. Making the sale would earn Yahoo! about <br>
US$19bn, and would make it much easier for the shareholders<br>to get a decent price now that Yahoo! is shopping itself <br>for a buy-out by someone else. Amongst the companies <br>wanting to buy Yahoo! are Alibaba, Silver Lake Partners, <br>
News Corp., a Russian company called Digital Sky <br>Technologies, and possibly Microsoft. Yahoo! has a market <br>value of nearly US$20bn. ***Ed: In other words Yahoo! Japan<br>is triple the value of Yahoo! in the USA -- testament to <br>
the skills of the local management.** (Source: TT <br>commentary from <a href="http://foxbusiness.com">foxbusiness.com</a>, Oct 7, 2011)<br><br><a href="http://fxn.ws/qFtZ79">http://fxn.ws/qFtZ79</a><br><br>-> Good growth in LED market<br>
<br>The post-earthquake power shortages were great news for one<br>industry in Japan: the LED manufacturers. Sales of LED <br>light bulbs hit 60% of the total sold in Q3, and as prices <br>steadily drop, annual growth is predicted to be 70%, taking<br>
LED market share to around 75%. Brand name LED bulb prices <br>are already down 25% and with the market entry of Samsung <br>and LG Electronics, this price point is expected to drop <br>much further. (Source: TT commentary from <a href="http://digitimes.com">digitimes.com</a>, <br>
Oct 7, 2011)<br><br><a href="http://www.digitimes.com/news/a20111006PD213.html">http://www.digitimes.com/news/a20111006PD213.html</a><br><br>-> Tsunami destruction tour<br><br>We wonder why it took so long. Finally a US adventure <br>
tourism company is offering US tourists a trip related to <br>the tsunami-devasted areas in Tohoku, but with a twist -- <br>the tourists will only see the debris swept out to sea. <br>Apparently the tour, which starts next year, has has an <br>
ecotourism theme and aims to document the environmental <br>impact of the Japan Tsunami Debris Field, which is making <br>its way across the Pacific towards the US west coast. The <br>tour will have two legs, one from the Marshall Islands and <br>
the other from Japan to Hawaii. ***Ed: Actually, the Japan <br>Tsunami Debris Field is an interesting topic. See more at: <br><a href="http://bit.ly/ij5E6F.**">http://bit.ly/ij5E6F.**</a> (Source: TT commentary from <br><a href="http://telegraph.co.uk">telegraph.co.uk</a>, Oct 7, 2011)<br>
<br><a href="http://tgr.ph/rioVZC">http://tgr.ph/rioVZC</a><br><br><br>NOTE: Broken links<br>Many online news sources remove their articles after just a<br>few days of posting them, thus breaking our links -- we<br>apologize for the inconvenience.<br>
<br>***------------------------****-------------------------***<br><br>+++ CANDIDATE ROUND UP/VACANCIES<br><br>=> BiOS, a Division of the LINC Media group, is actively<br>marketing the following positions for customers setting up<br>
or expanding in Japan, as well as other employers of<br>bilinguals.<br><br>** HIGHLIGHTED POSITION<br><br>BiOS is urgently looking for a Technical Support Engineer <br>with experience in providing IT support to end users in <br>
the office of our client in the Bunkyo-ku area. The <br>candidate will be responsible for providing level 1 and 2 <br>support to approximately 350 end users who are <br>predominately Japanese, as well as providing level-3 <br>
support of in-house network/server systems. You will also <br>be responsible for creating work-flow manuals for IT team <br>and end-users.<br><br>Due to the technical nature and demanding work environment,<br>this position is suitable for someone with solid experience<br>
as a desktop engineer supporting a day-to-day office <br>environment. In addition, since this role requires <br>extensive communications with IT engineers and end-users in<br>English, daily conversational-level communication skill in <br>
English and native-level Japanese are required.<br><br>Remuneration is JPY4m – JPY4.5m depending on your <br>experience and skill level.<br><br>** POSITIONS VACANT<br><br>- Project Mgr (Data Center), global IT co, JPY8M – JPY9.5M<br>
- Nw Engr, global telecommunications co., JPY6M – JPY8M<br>- Field Engineer, BiOS, JPY4.5M – JPY5.5M<br>- Assistant Editor, global publisher, JPY3M – JPY3.5M<br>- Service Delivery Manager, global IT co, JPY8M – JPY10M<br>
<br>Interested individuals may e-mail resumes to:<br><a href="mailto:tomohiro.kimura@biosjp.com">tomohiro.kimura@biosjp.com</a><br><br>** BiOS Job Mail<br><br>Every 2 weeks BiOS sends out a regular communication to its<br>
job seeking candidates, called BiOS Job Mail. Every edition<br>carries a list of BiOS's current and most up-to-date<br>vacancies, with each entry featuring a short job<br>description and a direct link to the main entry on the BiOS<br>
home page. Regardless of whether you are unemployed and<br>searching, thinking about a career change, or just curious<br>to know if there is something out there that might suit you<br>better, the BiOS Job Mail newsletter is an easy and<br>
convenient way for you to stay informed. If you would like<br>to register for the BiOS Job Mail, or to find out more,<br>please email <a href="mailto:kenji.sakota@biosjp.com">kenji.sakota@biosjp.com</a>.<br><br>Interested individuals may e-mail resumes to:<br>
<a href="mailto:tomohiro.kimura@biosjp.com">tomohiro.kimura@biosjp.com</a><br><br>-----------------------------------------------------------<br><br>***------------------------****-------------------------***<br><br>+++ UPCOMING EVENTS/ANNOUNCEMENTS<br>
<br>--------- Official Apache Solr training in English --------<br><br>For engineers in Japan! (October 25-27, 2011)<br><br>Train in Tokyo to become an expert Apache Solr engineer <br>with a course developed by the engineers who helped write <br>
the Apache Lucene/Solr code. This intensive, three-day, <br>hands-on, classroom course will be delivered in English by <br>certified instructors on Oct. 25-27, 2011 in Tokyo.<br><br>"Developing Search Applications With Solr" covers designing<br>
Solr applications, indexing, findability, Japanese search <br>support, faceted navigation, admin configurations, etc.<br><br>Training Info: <a href="http://www.lucidimagination.jp/training-en/">http://www.lucidimagination.jp/training-en/</a><br>
<br>Registration: <a href="http://bit.ly/oNarEZ">http://bit.ly/oNarEZ</a><br>-----------------------------------------------------------<br><br>----------------- ICA Event - October 26 ------------------<br><br>Speakers: Various from Apple Japan<br>
Title: Apple in Business<br><br>Details: Complete event details at <a href="http://www.icajapan.jp/">http://www.icajapan.jp/</a><br>(RSVP Required)<br><br>Date: Wednesday, October 26, 2011<br>Time: 8:00am Doors open, Coffee and Light snacks provided<br>
Cost: Free, open to all<br>Venue is Apple Store Shibuya<br><br><a href="http://www.apple.com/jp/retail/shibuya/map/">http://www.apple.com/jp/retail/shibuya/map/</a><br>-----------------------------------------------------------<br>
<br>---------------- Start a Company in Japan -----------------<br><br>Entrepreneur's Handbook Seminar 3rd of December, 2011<br><br>If you have been considering setting up your own company,<br>find out what it takes to make it successful. Terrie Lloyd,<br>
founder of over 17 start-up companies in Japan, will be <br>giving an English-language seminar and Q and A on starting <br>up a company in Japan.<br><br>This is an ideal opportunity to find out what is involved,<br>and to ask specific questions that are not normally <br>
answered in business books. All materials are in English <br>and are Japan-focused.<br><br>For more details:<br><a href="http://www.japaninc.com/entrepreneur_handbook_seminar">http://www.japaninc.com/entrepreneur_handbook_seminar</a><br>
-----------------------------------------------------------<br><br>***------------------------****-------------------------***<br><br>+++ CORRECTIONS/FEEDBACK<br><br>In this section we run comments and corrections submitted<br>
by readers. We encourage you to spot our mistakes and<br>amplify our points, by email, to <a href="mailto:editors@terrie.com">editors@terrie.com</a>.<br><br>*** No comments this week.<br><br><br>***********************************************************<br>
END<br><br>SUBSCRIBERS: 8,386 members as of Oct 09, 2011<br>(We purge our list regularly.)<br><br>+++ ABOUT US<br><br>STAFF<br>Written by: Terrie Lloyd (<a href="mailto:terrie.lloyd@japaninc.com">terrie.lloyd@japaninc.com</a>)<br>
<br>HELP: E-mail <a href="mailto:Terrie-request@mailman.japaninc.com">Terrie-request@mailman.japaninc.com</a><br>with the word 'help' in the subject or body (don't include<br>the quotes), and you will get back a message with<br>
instructions.<br><br>FEEDBACK<br>Send letters (Feedback, Inquiries & Information) to the<br>editor to <a href="mailto:terrie.lloyd@japaninc.com">terrie.lloyd@japaninc.com</a>.<br><br>ADVERTISING INFORMATION<br>For more information on advertising in this newsletter,<br>
Contact <a href="mailto:ads@japaninc.com">ads@japaninc.com</a>.<br><br>SUBSCRIBE<br>Get Terrie's Take by giving your name and email address at<br><a href="http://www.japaninc.com/newsletters/free_sign_up">http://www.japaninc.com/newsletters/free_sign_up</a>, or go<br>
straight to Mailman at:<br><a href="http://mailman.japaninc.com/mailman/listinfo/terrie">http://mailman.japaninc.com/mailman/listinfo/terrie</a><br><br>BACK ISSUES<br><a href="http://www.japaninc.com/terries_take">http://www.japaninc.com/terries_take</a><br>
or, <a href="http://mailman.japaninc.com/pipermail/terrie/">http://mailman.japaninc.com/pipermail/terrie/</a><br><br>Copyright 2011 Japan Inc. Communications Inc.<br><br>----------------- Japan Inc opens up Japan ----------------<br>
<br>J@pan Inc is Japan's only independently published English-<br>language business website. Authoritatively chronicling<br>online the business trends in Japan, each posting brings<br>you in-depth analysis of business, people and technology in<br>
the world's second largest economy.<br><br>Visit <a href="http://www.japaninc.com">www.japaninc.com</a> for the best business insight on<br>Japan available.<br>-----------------------------------------------------------<br>
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