TOKYO -- Mergers and acquisitions involving Japanese companies grew to a record high this year through September, with foreign investors snapping up Japanese businesses at an historic pace.

There were 3,883 such deals between January and September, according to M&A research firm Recof Data. This marks an all-time high for the nine-month period for comparable data dating back to 1985.

In terms of value, the deals totaled 22 trillion yen ($139 billion), down 20% from a year earlier. Last year was marked by major corporate shake-ups, such as telecom leader NTT fully acquiring NTT Data Group.

There were 326 inbound M&A by foreign companies in the first nine months of this year, a 20% increase. The value of the deals climbed 40% to 6.2 trillion yen, exceeding the total for all last year. So far, this year is already the third-biggest year by foreign buyers in terms of value.

M&A by investment firms grew 14% to 5.5 trillion yen, driven by large scale deals pursued by international investment groups. A prime example is Apollo Global Management taking Nippon Sheet Glass private in a 590 billion-yen deal.

Investment groups are allocating massive amounts of capital toward Japanese M&A. In April, the European player EQT established a $15.6 billion private equity fund focused on the Asia-Pacific region. The amount to be spent in Japan is expected to be in the hundreds of billions of yen.

U.S.-based Bain Capital also announced in May a $10.5 billion Asian fund. The plan is to allocate about half the amount to Japan.

EQT is engaged in a bidding war to acquire Kakaku.com, the operator of the popular restaurant booking site Tabelog. The counterparty is a consortium consisting of Bain and LY, the operator of the Line messaging app and the Yahoo Japan web portal. Japanese corporations are also increasingly carving out their businesses.

Renesas Electronics sold its timing device operation to U.S. chip design firm SiTime. Renesas is expected to post a 443.3 billion yen gain from the sale for the July-September quarter. In recent years, private equity firms from the U.S. and Europe have entered the Japanese market.

Warburg Pincus of the U.S. acquired the student dorm operator J.S.B. for roughly 200 billion yen. This is the first time Warburg Pincus took a Japanese company private since re-entering the market in 2025.

The weak yen has facilitated the growth of inbound acquisitions. Changes by Japanese companies are drawing foreign capital as well.

In 2023, the Tokyo Stock Exchange told listed companies to improve their price-to-book ratios. That led to widespread activity to revise business structures, such as through carve-outs.

Attitudes toward M&A in the Japanese business community have shifted as well. Guidelines for corporate acquisitions published by Japan's Ministry of Economy, Trade and Industry in 2023 "have further aligned the Japanese M&A market with international practices," said Akira Kiyota, co-head of Investment banking at Citigroup Global Markets Japan. "The Japanese market has the potential to become an even more active M&A environment," Kiyota added.

Furthermore, a minimum 30% tax will be applied to annual income in excess of 165 million yen starting next year. This is up from the 22.5% rate applicable to income exceeding 330 million yen.

Facing the extra tax bill, founders and owner-managers face pressure to sell business assets. Multiple investment funds have reported an increase in last-minute inquiries from owner-managers looking to sell their businesses.

During the January-September period, business succession deals rose more than 10% to 833, according to Recof Data. This is the highest number since 2007, the earliest year comparable data is available.

Japan's rising interest rates could trigger concerns about higher fundraising costs, but many believe the impact will be limited since Japanese rates remain low compared with other economies.