Mergers are beginning to pick up in Japan after slumping to a 10-year low in April, and bankers expect the pace to accelerate as the coronavirus pandemic forces weaker companies to consolidate.

“The pandemic may prompt a wider discourse about the viability of smaller players in some overcrowded industries,” said Yoshihiko Yano, head of M&A in Japan at Goldman Sachs Group Inc. “This could eventually become a catalyst for large-scale M&A activity.”

Dealmaking around the world is expected to rebound later this year after the initial shock of COVID-19 led companies to put plans on hold. Transactions in Japan and elsewhere in the Asia-Pacific will pick up before the U.S. and Europe as the region’s economies reopen more quickly, according to Tetsuro Umeno, head of investment banking at Deutsche Bank AG’s Tokyo-based securities arm.

More Japanese firms are likely to sell assets that are no longer seen as essential to their business, while others may seek to buy out more profitable units, said Takeshi Sakamoto, general manager of Mizuho Financial Group Inc.’s acquisition finance department. And with the country’s demographic woes only getting worse, companies are likely to resume their quest for acquisitions abroad as others face being sold because their aging owners lack successors.

Deals have already been emerging since April’s drought. Sony Corp. recently announced a $3.6 billion move to buy out its financial arm, while Toshiba Corp. agreed to sell its logistics unit for about $183 million. Health care provider NichiiGakkan Co. is conducting a management buyout through a tender offer by Bain Capital, and Shinsei Bank Ltd. agreed to buy a New Zealand finance firm for $480 million, its biggest overseas acquisition.

Fire sales, at least by large companies, are unlikely in Japan, where banks and the government offer robust support, Yano said. Still, he said more firms are likely to review their business models in the wake of the outbreak.

“It’s inevitable that some sectors will be forced to change the way they operate,” Yano said. “We may see the dawn of a new paradigm in cross-sector M&A.”

“The recovery in M&A market activity will be quick once economic activity resumes,” said Sakamoto. “New angles will emerge, reflecting changes brought by the pandemic, like people staying at home and working remotely.”

He said Japanese companies tend to have “sacred cow” businesses, like those cherished by their founders, but the pandemic could trigger changes in such thinking and lead to more divestments of noncore businesses. Also, deals involving succession issues “will come constantly.”

Umeno expects debt-laden companies in areas such as retail, real estate and tourism to consider selling assets.

“Cash-rich companies are already back in M&A markets,” he said. “Now is an opportune time for Japanese buyers.”

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