(Repeats to additional subscribers with no change to text) (For full coverage of Q3 M&A data, click [ID:nLO374398])
By David Dolan
TOKYO, Sept 29 (Reuters) - Japanese companies have already set a record for overseas acquisitions this year and the buying spree is expected to continue as cash-rich corporates in the world's No.2 economy take advantage of global credit turmoil.
Financial firms, drug companies and auto-parts makers are all likely to increase their overseas holdings as they move from domestic consolidation and look to expand beyond their shrinking home market, industry players said.
"It's very likely that we have entered an era where we're going to see significantly increased outbound M&A from Japan," said Ted Johnson, chair of the Tokyo office of law firm Paul Hastings.
"It will probably be more diverse than what you saw in the 1980s, which was very much directed toward the U.S. and was a lot of buying of real estate and setting up greenfield manufacturing operations."
Acquisitions abroad by Japanese companies already total $47.1 billion this year, according to Thomson Reuters data, breaking the full-year record of $44.2 billion set in 2006.
Nor does it include all of Nomura Holdings (8604.T) activity last week. Japan's largest brokerage agreed to buy the operations of failed U.S. investment bank Lehman Brothers in Europe, the Middle East and Asia. No price was disclosed, but a source told Reuters Nomura will pay up to $525 million for the Asian business, which has a staff of 3,000.
Having emerged from their own financial crisis just a few years ago, restructured Japanese companies are leaner, more efficient and sitting on cash. They are also saddled with few prospects for growth at home, as Japan's economy stagnates and its population declines.
And while the global credit crisis has left the West in turmoil, Tokyo has avoided much of the meltdown, making it easier for Japanese companies to buy big on the cheap.
As last week's financial deals show, Japanese firms are more decisive and opportunistic now than they were historically.
"If you have a strategic ambition to do something this is probably the best time in terms of execution," said David Threadgold, analyst at Fox-Pitt Kelton Cochran Caronia Waller in Tokyo, referring to acquisitions by Japanese financial firms.
"The prices are obviously dramatically lower."
MUFG said last week it figured Morgan Stanley shares to be worth $31 each, based on the firm's assets, although it had not yet determined a final deal price. That's a 60 percent discount from the seven-year high of $75.87 hit by Morgan Stanley a year ago, but it is more than the firm's $24.75 Friday closing.
For a table on outbound Japanese M&A, click [ID:nHKG262973]
For a related graphic, click here
While many targets are U.S. companies -- MUFG launched a $3 billion bid last month to take full control of California lender UnionBanCal Corp UB.N -- Japanese firms are increasingly looking to expand elsewhere, especially in Asia.
"There is a greater focus now by Japanese corporates to pursue inorganic opportunities across markets such as China and India," said Mark Renton, head of investment banking for Citigroup (C.N) in Asia.
Drug maker Daiichi Sankyo Co (4568.T) has bid up to $5 billion for control of Indian generic drug maker Ranbaxy Laboratories Ltd RANB.BO. NTT DoCoMo Inc (9437.T), Japan's top mobile phone operator, has also been looking to tap potential for growth in emerging markets such as Bangladesh.
The range of industries involved is also likely to expand.
"In addition to the continuing outbound M&A among pharmaceuticals and financials, we expect to see this trend spread to other sectors such as electronics, parts and materials," said Yuichi Akai, executive officer for M&A at Daiwa Securities SMBC, Japan's second-largest brokerage.
But aggressive expansion also presents challenges, especially cultural ones. Traditionally, Japanese firms emphasise seniority and stability over individual incentive and profits.
Johnson of Paul Hastings notes that during the last great Japanese acquisition boom in the 1980s, many of the targets were real estate assets. This time around, the targets are companies that will have to be integrated into global operations.
"Japan is growing more accustomed to developing these sort of truly global enterprises. (But) there's still a long way to go on that." (Additional reporting by Emi Emoto in TOKYO and Michael Flaherty in HONG KONG; Editing by Tony Munroe and Lincoln Feast)