TT-704 -- Why Do Deals Get Done in March? E-biz news from Japan.

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, Mar 31, 2013, Issue No. 704

+++ INDEX

- What's New -- Why Do Deals Get Done in March?
- News -- Japan's got talent
- Upcoming Events
- Corrections/Feedback -- Ukraine non-GMO beans safe?
- Travel Picks -- Spiritual Mt. in Yamagata, Onsen in Kochi
- News Credits

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+++ WHAT'S NEW

One thing that has always struck us as unusual about Japanese investment and M&A is that most companies thinking of doing a domestic deal often want to have the transaction happen between January and March 31st -- the last quarter of the financial year for most companies. We find this strange because both M&A and external investment are not regularly recurring business activities, instead usually being opportunistic (founders of target companies dying, small firms with suddenly popular technology, etc.). So why are they so based on the financial cycle here in Japan?

Our take is that M&A and external investments are seen as non-core activities and so equate to other "indirect" corporate activities, such as entertainment, overseas education, and community good works, and are given a "bucket-type" allocation each year. So it is that each April a fresh chunk of cash is set aside from last year's profits for M&A and external investments, in an amount that is considered OK to lose if the opportunity doesn't work out.

Thus we see major Japanese companies budgeting amounts ranging from mere millions of yen (private second-tier companies) to a more chunky JPY5bn (public first-tier players) -- but all with the common element that if the sums are not used, the money is returned to corporate treasury and everyone starts with a fresh slate the following year.

One of the effects of this ebb-and-flow approach to funds is that the corporate planning teams in each company's Shacho-shitsu (President's office) spend most of the year window shopping, and only look to pull the trigger after they've seen everything that is available for that given fiscal year. Come the last quarter, the best opportunities are hopefully still available, and then it's all hands to the deck to make the buy (or investment). This herd-like mentality can create lots of competition between companies for attractive targets and helps to push prices up -- but no one seems to mind.

[Continued below...]

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[...Article continues]

Actually, while we think of it, there is one other "popular" time for Japanese companies to execute M&As, and that is in July. This is because some older style companies insist on pushing all deals in excruciating detail past their board of directors. Needless to say, they don't get many deals done, and mostly the corporate planning staff have their time wasted.

Smart companies avoid the log jam by a process of trust. Junior staff may well find the opportunities, but it is senior managers who are expected to promote/champion a deal to the board. We have been told by several major firms that any deals priced at JPY100m or less can be pre-approved by a bucho/hon-bucho (Division Chief), with that person being able to subsequently expect an almost automatic approval of the deal by the board. The reason is that of course as the promoter of the deal, that bucho is then on the hook to make sure the deal is successful.

More than JPY100m and the deal needs to be promoted by an actual board member and proper due diligence done at senior level. These days, even "one man" company CEOs, who in the past would have made buying decisions on their own, now seek the support of their board before launching out on a purchase. In most private companies this means that deals only get vetted once a month (the frequency of board meetings) and if there are questions then the deal will get put back some months while that extra information is being collected and re-floated for the next board agenda. So it's not normally a quick process.

But then you have internet companies...

In the USA, we see the big players on the Internet: Yahoo, Google, Facebook, and others, investing in and buying out targets every day of the week. It's the American dream come true for smaller entrepreneurs who have had a good idea and a strong 3-5 year run powered with venture capital as rocket fuel. One player that is particularly interesting for its determination to build an internet business by acquisition is Oracle. Take a look at this page: http://www.oracle.com/us/corporate/acquisitions/index.html, and you will see that the company has spent billions just on buying six internet applications companies in 2012 alone. Very interesting stuff.

Japan is just a shadow of the volumes and values in the USA, but nonetheless we still have a healthy smattering of active acquirers and investors. Among these are Yahoo Japan, Rakuten, Softbank, DeNA, Gree, Opt, NHN, and others. Per our theory, since it's Q4 in this financial year, sure enough there are plenty of deals being announced. We see most of the action being focused on web-based marketplace and crowdsourcing operators.

One deal that caught our attention, because it is closely related to the foreign market and foreign vendors, is a new Yahoo Japan effort by subsidiary Indival. Apparently Indival has teamed with an unnamed foreign educational player to provide market matching for bilingual Japanese looking for postings abroad or jobs with foreign firms. The site charges a sign-up fee, then a reasonable JPY100,000/month. Where they make their money is if a successful hiring introduction is made. The charge is then JPY500K-JPY1MM per placement -- still a lot cheaper than using traditional recruiters.

Actually, this new service seems to be a bit of a knee-jerk reaction (another hall mark of Japanese investments) to a fresh competitor on the jobs placement website market, Livesense. You may have heard of Livesense because not only is the company public at only 6 years old, but its CEO is also the youngest president on the Tokyo stock exchange (he's just 26). Livesense also runs a job site, but it's the pricing model that has hooked customers. They only charge customers when they actually hire an employee, asking for 10% of the first year's salary. No one minds paying when their search is successful, and as a result, Livesense's sales have risen 400% in the last 3 years. Yahoo should be taking note -- we feel Indival's pricing is a little bit too rich and too similar to existing players to really stand out.

More interesting perhaps are those deals that remind you that Japan's traditional companies are still following the action and doing their bit at this time of the year. One such deal last week involved Tokyu Hands buying out a crowdsourcing website run by Opt Inc., called Dan-Te (http://dan-te.jp). The site is a marketplace for artists and others offering unique handmade goods to shoppers online. It is highly popular -- although we were surprised to find the main site is down tonight, with a message that they are redoing the website with new terms and conditions -- presumably to satisfy the risk requirements of Tokyu Hands.

Anyway, the message here is that it's not just the cherry blossoms that bloom in March. If you are an entrepreneur looking to sell your business, then the time to approach Japanese majors is in the second half of each year, allowing them time to decide, and to get their top people bought in before January rolls around. Then, with a bit of luck, you should get your deal done by March.

...The information janitors/

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+++ NEWS

- Yahoo Japan-NHN social search alliance
- Cerberus play on Seibu to be prevented?
- Google Street View maps Namie, Fukushima
- NEC may sell phone business to Lenovo
- Japan's got talent

=> Yahoo Japan-NHN social search alliance

One thing you can give Yahoo Japan credit for, they move quickly and decisively when they see a technology or an idea they like. The maker of the phenomenally popular LINE social posting software, NHN, has just formed a search alliance with Yahoo Japan to bring Yahoo users socially-weighted search functionality. What this means is that instead of getting just globally high-ranking search results, the user instead gets more results from those that they know, but whose content is still related to the search term. ***Ed: This could really catch on, so long as you have friends willing to create content...** (Source: TT commentary from e.nikkei.com, Mar 29, 2013)

http://e.nikkei.com/e/ac/TNKS/Nni20130329D2803A12.htm?NS-query=yahoo

=> Cerberus play on Seibu to be prevented?

In a press conference on Friday, the president of JR Tokai, who has been appointed to a special panel within Seibu Holdings, said that the government could introduce restrictions on the amount of shares that a foreign company can hold in Japanese rail companies. His announcement came as Seibu is trying to block Cerberus from gaining ability to veto board decisions (1/3 majority). When asked, the JR president denied that he was trying to protect Seibu. ***Ed: Ummm, what else would his statement be trying to do?** (Source: TT commentary from e.nikkei.com, Mar 30, 2013)

http://e.nikkei.com/e/ac/tnks/Nni20130329D2903N03.htm

=> Google Street View maps Namie, Fukushima

One of the towns inside the exclusion area around the devastated Fukushima Daiichi power plant, Namie, has been mapped by Google Street View, at the request of the mayor. The town that used to have 21,000 people is now deserted. The images are quite amazing and show what the planet would look like after two years if all the humans died. Namie will be off limits for decades, until the radiation levels in the area recede. (Source: TT commentary from guardian.co.uk, Mar 27, 2013)

http://bit.ly/16o3a2U (link to google images)
http://bit.ly/11YNFQ7 (link to article)

=> NEC may sell phone business to Lenovo

In a sign of the times in the cell phone business, NEC appears to be getting ready to sell its mobile phone business to China's Lenovo for an undisclosed sum. NEC will now only sell 4.3m cell phones this fiscal year, down 15% from the 5m target set a year earlier. The company is also said to be selling its mobile services subsidiary, NEC Mobiling, for US$850m, to Japanese firms. ***Ed: We did business with NEC's cell phone business frequently about 10 years ago, and always got the feeling that the company wasn't comfortable with consumer products. The company's roots are in telecomms infrastructure.** (Source: TT commentary from yahoo.com, Mar 30, 2013)

http://yhoo.it/Ylz5iz

=> Japan's got talent

Don't rile Japanese old folks, they're likely to bite back, as an NHK TV talent show found out recently. The show rejected a postcard application from a 70-year old pensioner trying to get on a Karaoke show, and he was so offended that they didn't even invite him in for an audition, that he phoned in a bomb threat to the station. The man was arrested in Niigata after his call ID number appeared on the NHK staffer's phone... ***Ed: What can we say?** (Source: TT commentary from telegraph.co.uk, Mar 29, 2013)

http://bit.ly/Xi7O1P

NOTE: Broken links
Some online news sources remove their articles after just a few days of posting them, thus breaking our links -- we apologize for the inconvenience.

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+++ CANDIDATE ROUND UP/VACANCIES

=> BiOS, a Division of the LINC Media group, is actively marketing the following positions for customers setting up or expanding in Japan, as well as other employers of bilinguals.

** HIGHLIGHTED POSITION

BiOS is urgently looking for a Help Center Analyst to work on an international helpdesk team supporting the command center of a global bank in Japan. The successful candidate will work in a team in Okinawa monitoring the IT help requests of the bank’s Japan offices 24/7 (night and weekend shifts sometimes required), and provide escalation to experienced IT engineers. In addition to help ticket escalation, the analyst will also create reports, provide translation services (written and oral), tracking and evidence resolution for changes made to web server content, and coordinate new installation and maintenance activities.

Due to the technical nature and demanding work environment, this position is suitable for someone with strong English and Japanese language skills, with the ability to multitask and work under some pressure.

Remuneration is JPY2.5M - JPY3.5M depending on your experience and skill level.

** POSITIONS VACANT

- Active Directory Engineer, Multinational, JPY 3M - 5M
- Data Center Operator, global financial services company, JPY 3M - 5M
- Application Support Helpdesk Engineer, global internet co., JPY 2.5M - 3.5M
- Staffing Consultant, IT integration services provider, JPY 2.5M - 3M
- Desktop Engineer, IT services provider, JPY 3M - 5M

** BiOS Job Mail

Every 2 weeks BiOS sends out a regular communication to its job seeking candidates, called BiOS Job Mail. Every edition carries a list of BiOS's current and most up-to-date vacancies, with each entry featuring a short job description and a direct link to the main entry on the BiOS home page. Regardless of whether you are unemployed and searching, thinking about a career change, or just curious to know if there is something out there that might suit you better, the BiOS Job Mail newsletter is an easy and convenient way for you to stay informed. If you would like to register for the BiOS Job Mail, or to find out more, please email jason.kisling@biosjp.com.

Interested individuals may e-mail resumes to: jason.kisling@biosjp.com and check out the BiOS web page for other jobs: http://www.biosjp.com/positions.php
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***------------------------****-------------------------***

+++ UPCOMING EVENTS/ANNOUNCEMENTS

------------------ ICA Event - April 25 -------------------

Speaker: Andrew Silberman, President and Chief Enthusiast of Advanced Management Training Group
Title: "Professional Networking Made E.A.S.Y."

Details: Complete event details at http://www.icajapan.jp/
Date: Thursday, April 25, 2013
Time: 6:30 Doors open, Buffet Dinner included and cash bar
Cost: 4,000 yen (members), 6,000 yen (non-members) Open to all. No sign ups at the door!!!!!!!
RSVP: RSVP by 5pm on Friday, April 19th

Venue is The Foreign Correspondents' Club of Japan, http://www.fccj.or.jp/aboutus/map
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---------------- Start a Company in Japan -----------------

Entrepreneur's Handbook Seminar 25th of May, 2013

If you have been considering setting up your own company, find out what it takes to make it successful. Terrie Lloyd, founder of over 17 start-up companies in Japan, will be giving an English-language seminar and Q&A on starting up a company in Japan.

This is an ideal opportunity to find out what is involved, and to ask specific questions that are not normally answered in business books. All materials are in English and are Japan-focused.

For more details: http://www.japaninc.com/entrepreneur_handbook_seminar
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+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted by readers. We encourage you to spot our mistakes and amplify our points, by email, to editors@terrie.com.

=> No corrections this week.

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+++ TRAVEL DESTINATIONS PICKS

=> The Ishioka Festival, Ibaraki
Local color and hundreds of years of history

One of the three biggest festivals in Eastern Japan is held every year during September in the city of Ishioka, Ibaraki Prefecture. Usually spanning the Friday, Saturday and Sunday of a long weekend, the festival fills those three days and nights with revelry and history, celebrating a tradition older than most countries.

I was lucky enough to be offered the chance to attend one day of the festival, and was even more fortunate to have a former local as my guide. Mr. Nakajima kindly took time out of his busy weekend schedule to give us a tour of the city’s historic sites, blending historical facts with personal reminiscences to flesh out the sights, and helped provide an insider’s viewpoint on the festivities.

http://japantourist.jp/view/the-ishioka-festival-ibaraki

=> Mountain Festival, Daisetsuzan, Hokkaido
Ainu dance rituals and traditions

I only knew about this festival because the owner of the mountain lodge Nutapukashipe told me about it when I made my reservation. She said we should try to arrive in the late afternoon, so that we could have an early dinner and visit the festival, which would take place just across the road. I didn’t really know what kind of festival it should be; however, I was very happy to apparently have chosen a good time to go to Asahidake Onsen.

The festival turned out to be an annual event, which is held every year in the middle of June to celebrate the official start of the hiking season. It’s seen as a ritual where local people and visitors pray to the god of the mountain for the safety of the climbers. ‘Perfect for us’ I thought, as we had indeed planned to go hiking the next day. It was so different from other Japanese events, as a great part was about presenting and remembering the culture and traditions of the indigenous people in Hokkaido, called Ainu.

http://japantourist.jp/view/mountain-festival-daisetsuzan

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+++ ABOUT US

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Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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