And that’s a severe problem for Japan’s burgeoning M&A market. “It’s very hard to find M&A lawyers,” says Linklaters & Alliance’s M&A head, Simon Davies. “Up 'til two years ago, the pass rate was 2%. So the number of qualified lawyers is very low. And they’re not necessarily commercially-minded.”
That’s not something he is necessarily complaining about, as he claims it is driving domestic Japanese firms to use Linklaters and other international firms. Linklaters advised Japanese firm Daiei when Mitsubishi Corporation bought a stake in Lawsons from Daiei. “There is a recognition we add value," he says.
Similarly when new accounting rules (one of the most significant things to hit Japan since World War II) recently kicked in, Mycal Corp discovered it was in trouble. So it sold 54.6% of People, a fitness centre chain to Konami. Linklaters advised on the equity financing for Konami’s tender offer.
And with the drive towards corporate governance, Linklaters is also undertaking a study on international approaches to corporate governance for one of the Japanese ministries.
“There’s a lot of work to be done here,” says Davies. The market, he says, is not necessarily that sophisticated. “I’ve seen M&A documents that are three to four pages long here. And I worked on a deal last year in which my counterparts were not aware what a disclosure letter was. So we’re talking about some fairly basic stuff.”
As a result, he says Linklaters tries to play an educational role in the market. “Where we excel is in the global distribution of legal know-how. So we do workshops and lectures here in Japan for market participants. One was on the Vodafone Mannesman hostile takeover and what the issues were there and how we overcame certain issues in German law.”
Since Japanese commercial laws have more in common with the old Prussian ones than English, such exercises are more than academic for a Japanese audience.
Davies, who cut his teeth doing M&A first in London then Hong Kong, says the trend towards ever more deals in Japan is rising. He predicts annual M&A volumes of $200-$300 billion will soon occur, with the emphasis being in FIG, chemicals, pharmaceuticals and retail.
Little wonder he’s requesting more resources from head office. A few more Japanese lawyers would be useful, too.
