Century-old global mining-and-metals conglomerate Anglo American plc has been on a roller coaster since the end of May, when it dramatically cut off merger talks with rival BHP and instead announced a sweeping restructure of its portfolio.

Many analysts greeted the plan with skepticism. UBS downgraded London-based Anglo American from Buy to Neutral, citing the restructuring scenario and the hurdles to getting it done by the end of 2025, as management has pledged to do, and the German private bank Berenberg affirmed a Sell rating. In the two months following the announcements, Anglo’s stock price fell 18%.

The auguries worsened at the end of June, when a fire caused the shutdown of Anglo’s Grosvenor coal mine in Australia. New York-based investment bank Jefferies attributed 30% of the value of Anglo’s steelmaking coal business to the Grosvenor mine; its coal operations are one of the assets the company plans to sell as part of the restructuring. Production is not expected to resume until next year.

“Anglo’s main problem this reporting period will be with the coal operations and how it will sell a burning coal mine,” quipped Ian Woodley, portfolio manager at Old Mutual.

Three weeks later, Anglo released its latest results, and the bad news seemed to pile up further. The company took a $1.6 billion impairment based on its decision to slow the development of Woodsmith, its promising venture into organic fertilizer production in the UK. The decision, which was intended to help Anglo focus on its restructuring, swung the company from a net profit of $1.26 billion in the first half of 2023 to a $672 million loss in the first half of this year. 

“Anglo’s valuation upside no longer looks compelling on a standalone basis,” JP Morgan’s equity research team concluded, suggesting it may still be a takeover target.

The restructuring itself is a complicated affair. Aside from selling off its coal operations and executing various cost-control measures, Anglo aims to demerge Anglo American Platinum (Amplats), put its nickel mining operations on mothballs for possible divestment, and divest or demerge its fabled DeBeers diamond unit, which will move Anglo out of the diamond business for the first time in almost 100 years. The end-product, chair Duncan Wandblad forecasts, will be a leaner, more linear company, laser-focused on copper and iron ore production, which are expected to benefit from the shift to green energy, and last year accounted for 70%-plus of Anglo’s EBIDTA. 

Should the plan succeed, Anglo will be “a higher quality company,” says Morningstar equity analyst Jon Mills, “as it will be less leveraged to changes in commodity prices, led by its high-quality, low-cost, long-life copper mines, including 60%-owned Quellaveco in Peru and 44%-owned Collahausi in Chile.”

Despite the difficulties, such as regulatory approvals needed in South Africa and Botswana, Amplats having to renegotiate supplier contracts and funding lines, and De Beers struggling with a downturn in the diamond market, some analysts think Anglo can pull it off.

“The plan is viable,” says Dawid Heyl, portfolio manager at Ninety-One, a large Anglo shareholder, “and while the execution risk is real, they’ve given themselves a good amount of time to get it done.” Anglo’s stock price is still trading well above the levels it reached before BHP’s bid emerged in April, he notes, “so the market is giving them the benefit of the doubt.”

Anglo reported a modest first step in its restructuring in late July, when it finalized an agreement to sell two royalties to Taurus Funds Management for $195 million: an iron ore royalty owned by De Beers related to an Australian iron project, and a gold and copper royalty related to a project in northern Chile.

“The main risks,” says Mills, “are that it takes longer than intended, and that Anglo accepts bids for its assets that are lower than they should be as it tries to meet its target completion date while minimizing the risk of BHP returning or other suitors emerging.”

But Radoslaw Beker, director at Fitch Ratings, argues that the prices Anglo expects to reap from the assorted divestments and demergers are not overly optimistic: “If the market environment remains stable through the next year, we don’t see problems in getting their numbers. Based on the company’s announcement, and the justification for it, we think it’s achievable.”

Should it succeed, Anglo’s huge restructuring will cap a long-term trend in the mining-and-metals industry away from the diversified model that has been the company’s hallmark for more than a century.

“A diversified model was an advantage at one point,” Heyl notes, “but today, you don’t get rewarded for that, which is why Anglo has been trading at a deeper discount than other miners.”

Wanblad’s vision for the company “shows a real focus on metals, longer term,” says Beker, “and this is the trend that miners want to go in.”

The announcements in June by Japan’s three megabanks that they will sell $5.4 billion of their strategic cross-shareholdings over three years mark a milestone in the decades-long effort to remodel Japanese corporate governance along more investor-friendly lines.

Mitsubishi UFJ Financial Group said it plans to sell $2.2 billion of cross-shareholdings by the end of March 2027, Mizuho Financial Group expects to sell $1.9 billion over the next three years, and Sumitomo Mitsui Financial Group expects to divest more than $1.3 billion by March 2025. Significantly, Mizuho CEO Masahiro Kihara said the bank will either pass on the proceeds from its sales of equity holdings to investors as dividends or invest them in growth-directed activities, and Sumitomo Mitsui aims to reduce the market value of its equity holdings to less than 20% of the value of its consolidated net assets.

The megabanks’ announcement represent a milestone because Japanese banks have been one of the heaviest holders of strategic shares, dating from the decades following World War II, and among the most reluctant to wind them down says Haonan Wu, manager of engagement, EOS at Federated Hermes, a provider of stewardship services to investors on elections, obligations, and standards.

As such, the big banks’ pledges suggest that Japanese business is taking the need for change seriously, Wu says. “We’ve been discussing this for a number of years, holding meetings with the banks’ board of directors.”

The three big banks are not the only major Japanese companies pledging to reduce cross-shareholdings, which are strategic stakes that companies hold in their closest business partners, including suppliers and corporate customers. In May, some 70% of the companies listed in the Tokyo Stock Exchange’s (TSE) Prime market of large, global stocks said they would be selling off cross-shareholdings. And efforts by regulators to encourage the phase-out go back at least 20 years; average holdings of strategic shares by companies in the TOPIX 500 index dropped from 13.5% of new assets in 2015 to 8.4% in 2023. But the pace has been slower than this suggests; as of last year, 320 companies or 64% of the TOPIX still had more than 10% of their net asset value tied up in strategic shareholdings.

Traditionally, cross-shareholdings were seen to cement close, long-term relationships with counterparties as well as to assure management of a reliably loyal block of voting shares. However, a growing chorus of investors—especially those based overseas—have criticized the practice as an inefficient use of capital as well as a questionable corporate governance practice, since companies’ independent directors often represent strategic partners.

Institutional Shareholders Services (ISS) and Glass Lewis, the two big US proxy advisors, have been vocal on the issue. And in May, the Asian Corporate Governance Association—which includes Black Rock, Fidelity, and Federated Hermes—published an open letter calling on Japanese companies to “accelerate the further reduction of these shareholdings, which we believe in principle should be zero for most companies.”

In past years, such admonitions might have had less impact, but times appear to be changing. With the Japanese economy sluggish, Wu points out, the TSE has become concerned about the low price-to-book ratios of its listed companies, including banks; half of Prime members traded below book last year. The bourse now requires companies trading at less than a one-to-one price-to-book ratio to disclose their policies and initiatives for improvement and advised them to focus more on capital efficiency: for example, by reducing cross-shareholdings.

Japanese companies appear to be responding. Jun Frank, global head of governance and compensation at ISS-Corporate, notes that share buybacks—traditionally not a common practice—are up.

“Japanese companies historically have held onto cash rather than doing buybacks or paying out dividends,” he says, “so a lot of companies have a large stockpile of cash on their books. Now they’re thinking more strategically about how to allocate capital.”

Additionally, with Japanese stocks outperforming the Standard & Poor’s 500 for more than a year—the Nikkei index reached its highest level in 33 years in May—now would seem like a good time for companies there to unwind their strategic portfolios. Japanese investment firm Keystone Partners announced in March that it was setting up a $636 million fund to buy divested cross-shareholdings.

There’s no knowing for sure how far divestment will go; in March, Japan’s Financial Services Agency noted that some companies, which are now required to list their top 60 strategic shareholdings, may be engaged in “shareholding washing”: getting around the rule by claiming to own them only for trading purposes.

But if divestments do accelerate, Frank foresees a profound change in how Japan’s traditionally insular corporate boards behave. Fewer cross-shareholdings will “increasingly lead to greater board independence,” he says, the odds that activist shareholders can make themselves heard will improve, and “that will encourage companies to be more efficient in how they allocate their capital.”

At a bilateral investment conference in Cairo on July 1, European Commission President Ursula von der Leyen announced that European companies were signing deals for more than $43 billion with Egyptian companies “ranging from hydrogen to water management, from construction to chemicals, from shipping to aviation and to automotive.” 

“Egypt really is enjoying a moment,” observes David Lubin, a senior research fellow at Chatham House in London and a seasoned global economic observer. That could well be an understatement.

Shortly before, GV Investments, Egypt’s sovereign investment fund, signed four agreements worth $40 billion with European developers to produce green ammonia, a renewable form of fertilizer that joins hydrogen extracted from water and nitrogen obtained from air. The deal potentially makes Egypt a big player in the renewable energy market.

Those announcements followed a partnership agreement that GV Investments signed in May with Chinese automobile manufacturer FAW to produce FAW’s low-cost electric sedan, the Bestune E05 model, locally for the Egyptian market. A month earlier, the EU announced that it would provide $1.1 billion in short-term financial aid to support the Egyptian economy, one leg of a $5.4 billion assistance package through 2027 that still needs to be approved by EU members. A month earlier, Egyptian President Abd el-Fattah el-Sisi’s government signed an expanded $8 billion loan deal with the International Monetary Fund.

And that followed close on the heels of the biggest deal of all: a $35 billion mega-investment by ADQ, Abu Dhabi’s sovereign wealth fund, to develop a stretch of Egypt’s Red Sea coast for tourism, real estate development, and other projects. Some of that commitment has already been fulfilled, Lubin notes, and is now bolstering the books of the Central Bank of Egypt and some of the Nile nation’s commercial banks.

ADQ’s investment represents a major vote of confidence in the el-Sisi government’s efforts to reform and open up Egypt’s creaky economy, and was likely a catalyst for the deals that followed, Lubin says. “Success builds on success,” he says, “and if Egypt can attract what amounts to just under 10% of its GDP from the United Arab Emirates, it minimizes the risk of a debt default, replenishes the central bank’s position, and gives confidence to other investors.”

What stands out about the July 1 deals, however, is the range of industries they represent.

Egypt has long been regarded as a narrow economy concentrated in just three sectors: energy, agriculture, and tourism. The Gulf and EU governments have plenty of reasons to want to help stabilize Egypt, with its 111 million people and strategic location with the war between Israel and Hamas flaring on one side and the Mediterranean, the pivot point of Europe’s migrant crisis, on the other. But what’s in it for European water management, automotive, and chemicals companies, among others?

“At the moment, these are just investment pledges,” notes Robert Mogielnicki, senior research scholar at the Arab Gulf States Institute in Washington, DC. “The proof will be which of these pledges materializes, and that depends on whether Egypt makes concrete progress on the economic front.”

That’s a tall order. Egypt shoulders a debt burden equal to more than 95% of its GDP, more than one in four Egyptians lives in poverty, and economic growth is stubbornly slow. But Lubin notes that Egypt, with its enormous market and strategic location, is a relatively inexpensive investment today compared to Europe.

“It helps that the Egyptian pound is exceptionally cheap,” he says. “Trade-weighted, it’s as cheap as it’s ever been.” That helps motivate foreign direct investors outside the three industries that traditionally have anchored the economy. The long-term assistance package from the EU, meanwhile, tells European companies that their governments are committed to making Egypt’s economic modernization a success, Mogielnicki notes.

Conditions for foreign investment could improve, too, if the government follows through on its commitments to the IMF. These have three pillars, Lubin says: switching to a flexible exchange rate and establishing a credible inflation target, tightening fiscal policy, and creating a level playing field, in part by reducing the army’s outsized presence in the economy. 

So, what could go wrong?

Given the magnitude of the EU companies’ pledges—and those from China and the UAE—they could meet with pushback from “entrenched domestic business interests” anxious not to be muscled out or reduced to accepting crumbs, Mogielnicki cautions. Those would include elements of the army, which is Sisi’s base of power.

A more immediate concern will be whether the government can fulfill its end of the IMF deal. The central bank has a long philosophical commitment to maintaining a stable currency, contrary to the IMF’s demand, Lubin points out. Setting and sticking to a credible inflation target will be difficult. And creating a more welcoming market environment for outsiders will be politically tricky if not impossible.

Time will tell which of the EU companies’ deals comes to fruition, and how they will affect Egypt’s economy and the people who make it up. Clearly, however, each element of the larger progress that is pulling together to modernize one of the world’s oldest societies—EU and IMF subsidies and loans, economic policy reform, and FDI—will have to work for all of them to succeed.

General Electric announced in April that it was selling the New York property where Jack Welch once held forth to his acolytes at the company’s fabled management academy, for $22 million. The same month, Apple went public with plans for a $250 million expansion of its Singapore regional hub, adding that it was considering increasing its manufacturing presence in other parts of Southeast Asia.

The headline announcements appeared to reflect a larger shift in how and where major corporations are investing in office space—and where they are not.

After a couple of decades when tech companies drove office expansion in large US cities, they are cutting back. According to CBRE, the commercial real estate firm, more office space with a major tech presence is available for sublease than at any time in the past 10 years: 168.4 million square feet (15.6 million square meters), helping drive the national office vacancy rate to a record 19.8%. The Federal Reserve Bank of Kansas City reported in March that average weekly office attendance in large metropolitan areas—measured by employee badge swipes—had still only recovered to about half its pre-pandemic level.

Half a world away, the trend is quite different. In March, global real estate consultant Knight Frank projected that the offshoring market in Asia-Pacific will more than double by 2032, fueling an additional 4.7 million to 5 million square meters of office space demand annually over the next three years. Owing partly to stricter economic rules for foreign companies in China and Hong Kong and partly to its own efforts to attract major companies, Singapore has benefited greatly from the trend and is now the regional headquarters for major names including Microsoft, Google, FedEx, Rolls-Royce, Mead Johnson, TikTok, and Shein. Office vacancy rates there were less than 5% early this year, according to Bloomberg Intelligence.

Commercial real estate trends “are driven by the structure of the economies and of the real estate markets themselves,” says Ryan Luby, a senior expert and associate partner at McKinsey & Co. And while there is some evidence that the corporate sector is expanding faster in Southeast Asia’s major cities than in their US counterparts, this should not be overstated, cautions Richard Barkham, chief global economist at CBRE.

The office market in Southeast Asia has weathered the Covid pandemic and the shift to remote and hybrid work structures more successfully than the US, Luby argues, in part because of the nature of its urban areas. Downtowns in cities like Singapore, Kuala Lumpur, and Manila tend to be mixed-use rather than dominated by corporate tenants, and the residents more densely concentrated, in contrast to America’s sprawling cities with their large suburbs and typically long commute times. That, coupled with efficient public transit systems, makes daily travel for on-site work less time consuming and expensive, notes Patrick Wong, Asia-Pacific real estate analyst at Bloomberg Intelligence.

“Southeast Asia will see more remote work in the next 10 years,” Luby says, “but it will not ever see the level of San Francisco”—and much of this will be hybrid rather than purely remote work, with employees spending at least some time in the corporate office.

Barkham notes that the average dwelling size in Asia-Pacific cities, from Tokyo to Jakarta, is smaller, making at-home work for two-earner families less practical: a fact that has helped keep remote work to a minimum, even in the face of Covid. Businesses occupying US office towers, as well, are heavily concentrated in technology, finance, business and professional services: the sectors that are most amenable to remote work. Increasingly, this is the case in Asia-Pacific cities as well, but the transition from manufacturing-based economies to services is still in process there.

Aside from the impact of remote work, other economic factors favor faster growth in Southeast Asia’s cities, experts say.

Singapore began to see more big companies building up their presence there after about 2015, when higher labor costs started in China, Luby notes, and the subsequent trade and political tensions have only accelerated the shift, which continues. As for US companies expanding their presence in the region, Barkham notes that they are under pressure to reduce costs, and faster communications make it easier to send even high-level functions to locations in Asia. India is especially well-positioned to benefit from these factors, since it has a highly educated workforce with high English proficiency and a legal system that features strong property rights, but other countries such as Singapore, Malaysia, and the Philippines will also benefit. A growing middle class, meanwhile, gives the entire region an expanding consumer market for financial services that US companies want to connect with more directly.

Despite the battering Hong Kong’s image has taken from Beijing’s crackdown on its quasi-autonomous status, it shares some of the same advantages as Singapore. These include English language skills, common law-based legal system, and low taxes, Wong notes. And while its office market is slacker than Singapore’s, it stands to gain in coming years, he says, citing China’s continuing need for funding via Hong Kong’s vast capital markets and an inflow of wealth from the mainland that both the local government and Beijing have fostered, helping to support office demand. While Singapore has a claim to be the safer location, Wong says, Hong Kong is closer, and moving money there does not run up against the tighter regulations Singapore recently put in place to combat money laundering.

That said, it is easy to read too much into present trends, Luby cautions.

The biggest factor keeping the US office market from recovering, he says, may not be the lure of remote work, but a housing shortage that amounts to some 4 million to 5 million residential units nationwide and hits residents of major urban areas especially hard. Canadian investment manager Brookfield, in a February report, argued that the growing issue for New York, in particular, is supply. “There is an excess of dated, functionally obsolete office buildings and an undersupply of offices that satisfy tenants’ changing needs,” it noted.

But the New York region remains the largest and deepest talent pool in the world, which continues to attract workers despite a high cost of living, Luby adds, and developers and management companies will retrofit older buildings to add amenities that attract employers even as they develop new ones. Nor are the days of rapid expansion guaranteed to continue in Southeast Asia, he argues; while it has increased its share of global production, the region is experiencing a birthrate decline similar to China. Whereas recently it was “galloping, it is now slowing to a walk,” he says.

Who wouldn’t want to own a piece of the most valuable start-up in the world?

Valued, by some reckonings, at $220 billion last year, ByteDance arguably can claim that title. It boasts a majority ownership that includes financial powerhouses KKR, Sequoia Capital, Susquehanna International, General Atlantic, Tiger Global Management, and SoftBank. Aside from its crown jewel, TikTok, it numbers such popular apps as editing tool CapCut, workplace collaboration tool Lark, and news platform Toutiao among its creations.

And there always appears to be more on the way. ByteDance’s product pipeline rests on a specially designed shared services platform, geared to quickly deploy the right resources to the right project and get the resulting product out of the shop fast, that has attracted wide admiration including a 2022 analysis by Harvard Business Review.

The payoff for the privately held company: reported 2022 revenue of $80 billion and $25 billion in gross operating profit and a 60% profit surge in 2023. Thanks in large part to its most popular app, it was the first Chinese company since tech giant Huawei to establish a truly global brand, and the first to enjoy a resounding success with non-Chinese consumers, points out Fabian Ouwehand, CEO and co-founder of FRL, a social shopping platform, who has worked since TikTok’s debut with clients seeking to use the app to launch businesses.

But much of ByteDance’s rapid success—it only opened its doors a dozen years ago—could be in jeopardy if it finds TikTok locked out of the US by act of Congress. Speculation is rife about the future of the mega-popular video hosting service if it loses that market. It is already banned in over a dozen countries, from Afghanistan and India to the Netherlands and Taiwan; in February, the EU opened a formal investigation of its presence in Europe.

Complicating matters, TikTok is locked in intense rivalry with other social media providers; last month, it launched “TikTok Notes,” a text-and-images app that will compete directly with Meta’s Instagram. Many members of Congress that will decide TikTok’s fate no doubt hold some Meta stock in their portfolios.

But what about the company that birthed the app?

TikTok—along with its counterpart in the Chinese market, Douyin—is more than just ByteDance’s most visible and successful product, close observers say. It is the linchpin of the company’s ambitions to turn itself into a global powerhouse and an innovator in the commercial application of artificial intelligence. While the US market still represents only a small portion of TikTok’s revenue stream, it is vital to BydeDance’s effort to exploit the brand’s global presence, says Ouwehand.

Ivy Yang, founder of New York-based consultancy Wavelet Strategy, goes further. Without the promise of TikTok’s US market—users, advertisers, and more recently Chinese and other e-commerce vendors eager to sell to Americans—its parent will have difficulty attracting the funding it needs for the next stage of its own growth, she argues.

“Because of the potential of a ban, ByteDance is between a rock and a hard place for either placing an initial public offering or continuing to raise money privately,” Yang says. “The US has the largest audience, but it’s important not just because if the sheer numbers but because it’s potentially the most valuable market given the lifetime value of its customers.”

Douyin is still ByteDance’s biggest cash cow, but it is already used by close to half of China’s people, Yang notes, and so probably will not grow as rapidly going forward. Given the decline in consumer sentiment in the country, Douyin’s revenue growth could slow down. That puts more weight on the US in the eyes of investors; a curtailment in that market would make an IPO, which once looked like a logical next step for ByteDance, a tougher sell, Yang says.

It’s been argued that a ban on TikTok could be less of a catastrophe than predicted for its creator; in China, many users of prohibited foreign apps access them via virtual private networks anyway. But while VPNs could keep many if not most of TikTok’s current US users on board, Yang notes that they would add several steps for prospective new users looking to sign up and build user habit, and hence could slow future US growth: still not a good look for an IPO candidate. Additionally, should Congress pass an anti-TikTok bill, ByteDance will probably fight the legislation in court; while it might ultimately win on First Amendment grounds, the price would likely be years in legal limbo and another de-inducement to would-be backers.

Just how much of a negative a US ban would be to ByteDance’s long-term prospects is debatable, Ouwehand counters. E-commerce is a key component of the company’s long-term strategy, and it has had rapid success building its TikTok Shop platform into the app; in just a few years, he predicts, it could surpass Amazon globally, if not in the US. Meanwhile, the slow pace of action on TikTok’s status in Washington gives ByteDance time to figure out its next move.

“If a sale is forced, ByeDance will find a way to structure it so that it benefits them,” he predicts. Besides, the company has found ways around such dilemmas in the past; when TikTok was banned in Indonesia, he notes, it turned around and purchased that big market’s largest e-commerce platform.

Even people who know the company well have faulted ByteDance’s public and government relations strategy for letting matters get to this point, however. “The US is still a small portion of a big, global company, and they didn’t prioritize it for too long,” Ouwehand says. “I think they should be campaigning there every day.”

TikTok’s troubles in the US go back at least to 2020, when then-President Donald Trump ordered ByteDance to divest the app. The incoming Biden administration reversed the decision.

The company responded by spending $1.5 billion to launch “Project Texas,” which transferred all of TikTok’s U.S. user data to Oracle servers located in Austin.

That was a misreading of the problem, charges Yang; ByteDance was attempting to address a geopolitical problem through a technical fix that convinced none of its Washington critics. Efforts to find a US owner for TikTok only beg the question of how “American” the app needs to become to satisfy Congress—which hasn’t yet passed a bill defining this—and ignore Beijing’s firmly stated unwillingness to let TikTok’s valuable algorithm fall into foreign hands.

“At the heart of the issue, China/Bytedance will never allow the source code to be sold to a U.S. tech company, in our view, which makes this all a spiderweb issue for any potential strategic buyer,” Dan Ives, managing director at Wedbush Securities, told Nikkei Asia last month.

For ByteDance, then, much rides on its ability to lobby Congress and regulators not to shut down its biggest product in its most strategically important market, not least the future of its next stream of new products. In February, it launched Coze, a rival to Chat GPT in generative AI. Earlier, it was reported that the company was recruiting American talent for new initiatives in natural sciences and drug development. And in March, ByteDance announced that it was starting to incubate new online games, after having shut down an earlier effort.

Normally, the question would be whether any of these projects would be linked to TikTok in some way; the app is now a news source, not just an entertainment hub. But with the app’s future—at least in part—in the hands of Congress, the larger issue is whether ByteDance can continue to attract the capital it needs to keep innovating, both through TikTok and investors drawn to it.

Rep. Mike Gallagher (R-Wis.), chairing the House Select Committee on Competition with China, underscored the knottiness of the problem when he appealed to American investors with a stake in ByteDance to urge reluctant Chinese regulators to allow a sale. Some 60% of ByteDance is owned by non-Chinese entities, including General Atlantic, KKR, Sequoia Capital and Susquehanna International, of whom the latter three have seats on its board.

Gallagher’s comments also suggest that even congressional China hawks do not want to see TikTok banned from the US, where it boasts 170 million enthusiastic users and content creators. In theory, a sale should not be impossible; under pressure from lawmakers, Beijing Kunlun Tech agreed to sell dating app Grindr in 2019, unloading it to San Vicente Acquisition for $608.5 million.

But that deal took nine months to complete—and TikTok is a far bigger and more complex property. Wedbush Securities has valued its US operations at $100 billion, meaning only
a select few potential buyers would be in the running. Wedbush analyst Scott Devitt suggests behemoths—and competitors—Apple, Microsoft, Meta Platforms, Amazon, and Google parent Alphabet as candidates.

However, Joe O’Brien, director at M&A advisory firm FE International, counters that this would raise antitrust concerns. He argues that a consortium of private equity firms could cobble a deal together—without the competitive sensitivities, and in the time allotted. “I would say there’s no single buyer,” he says.

Whether a single concrete proposal will ever be considered remains to be seen, however. The US House bill will take time to find a companion in the Senate, despite considerable support there and President Joe Biden’s backing. And ByteDance has spent record-breaking sums on its Washington lobbying efforts and has said it will go to court to prevent a forced sale. This video clip has only just begun.  

Japanese giant Nippon Steel Corporation unexpectedly found itself awash in controversy in December when it announced a blockbuster deal to acquire its iconic American rival, United States Steel (USS), in a transaction valued at $14.9 billion. Heading into a general election year, the news prompted a protectionist backlash from unions, several key US lawmakers, and ex-President Donald Trump, which has continued as it awaits regulatory approval.

For some, Nippon Steel’s bid brought back memories of the late 1980s, when acquirers flush with cash and riding high on the Japanese bubble economy, scooped up trophy properties like Rockefeller Center and Columbia Pictures. Making it further attention-grabbing, the deal, at $55 per share, was worth $20 more than the next largest bid, by US-based Cleveland-Cliffs, for a startling 14.2% premium.

Was this merely a Japanese variation on the opportunistic deals that private equity firms have been launching in the US for years, and which have often resulted in the dismantling and selloff of yet another classic American brand?

Not if you look at the pattern of Japanese acquisitions since the bubble deflated, say some close observers who have worked with Japanese companies. Deals like Mitsubishi Chemicals’ purchase of Lucite (2008), Suntory Holdings’ acquisition of Jim Beam (2014), and Mizuho Financial Group’s purchase last July for $550 million of Greenhill & Co., to name three of the more prominent, were strategic acquisitions designed to increase the acquirer’s presence in its industry and in the US and other markets, not generate a fast buck.

The Greenhill deal prompted reports in the Financial Times and elsewhere that other Japanese companies were in the hunt on the other side of the Pacific. Interest in outbound deals was already picking up prior to the Covid pandemic, when they totaled more than $77 billion in 2019; over the past year, the Greenhill and now the USS deal suggest the pace is picking up again.

“Japanese companies realize they need to be thinking like global companies,” says Rochelle Kopp, managing principal at Japan Intercultural Consulting in Tokyo. “The Japanese market is not growing due to population decrease, so they want to be involved in markets with a higher growth potential than Japan.”

Should Nippon Steel succeed in closing its deal for USS, Kopp predicts, it’s “likely to make significant investments of cash and human resources into USS and actively be trying to expand its US business.” That being the case, Nippon Steel’s willingness to pay up for USS makes more sense, she argues.

Nick Wall, a partner with international law firm Allen & Overy in Tokyo, questions whether the transaction really would be overpriced for a Japanese acquirer, however.

“Yen-based debt is very available and very cheap,” he notes, and financing for the purchase was announced at the end of January from three Japanese megabanks: Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group, and Mizuho Financial Group. “If the price of financing is in the 1% to 1.5% range, then the premium overall becomes a lot more reasonable.”

Another factor favoring strategic acquisitions by firms like Nippon Steel is the value of the yen itself, which has trended down to the range of 110 to the dollar from its longtime level of about 150. “That makes deals more expensive,” says Wall, “but the flip side is that for a company with a long-term view, buying a revenue stream in dollars or another major currency is very attractive.”

A further attraction at a time of rising economic nationalism in the US is the desire to increase their physical manufacturing presence there. “It’s a very important market for these companies,” Wall notes, which will want to secure their share of it going forward.

It doesn’t hurt, either, some observers have noted, that they are not Chinese companies, which have borne the brunt of American suspicion in recent years.

Still, Nippon Steel has the handicap of asking regulators to bless its USS purchase in highly charged election year. “There are a lot of political headwinds,” Kopp observes, “and if politics scuttles this, it could discourage other Japanese companies coming into the US.”

When extraction of oil and gas from shale deposits took off a dozen years ago, it sparked a revolution that enabled the U.S. to become a global mega-producer of fossil fuels due to technological breakthroughs in hydraulic fracturing and horizontal drilling. Now, energy analysts say, the guard is changing as shale production matures and the capital requirements to maintain production intensify.

Shale now accounts for 10% of worldwide crude oil and 32% of global natural gas that is currently recoverable, according to the U.S. Energy Information Administration. West Texas’s Permian Basin is the second largest oil field in the world, behind Saudi Arabia’s giant Ghawar field. That makes the Permian the dynamic center of oil and gas extraction in the U.S., and the place where this latest chapter of the energy saga is being written.

In a series of major deals last fall, some of the pioneers of shale production in the region sold out to the oil-and-gas majors, greatly consolidating the U.S. industry. Highlighting the trend were Exxon Mobil’s $60 billion purchase of Pioneer Natural Resources in October and Occidental Petroleum’s $10.8 billion deal to buy CrownRock in December. Oil and gas deals totaled more than $250 billion last year, the largest figure in nearly 10 years.

These deals are big, and expensive—Oxy is paying some $5 million per location for CrownRock’s assets, which Andrew Dittmar, a director at Enverus Intelligence Research, described a “nose-bleed territory”—but are unlikely to move the needle on global oil prices more than marginally. Their real importance, analysts say, is in what they signal about shale production in the Permian over the remainder of the decade.

Several factors account for the buying spree. Peter McNally, global sector lead, industrials, materials, and energy at Third Bridge, notes that oil and gas prices have been trending down, making many producers more interested in cashing out: especially those like Pioneer, whose CEOs are retiring or approaching retirement age. “There have also been a number of properties that were stuck in private equity portfolios longer than normal due to the Covid collapse,” he adds. And as public information shows, companies like Oxy, which were struggling a few years ago with high debt levels, have cleaner balance sheets today, says Raoul Leblanc, vice president of energy at S&P Global Commodity Insights.

More fundamental issues are at play, however, Leblanc notes. An exciting new contributor a decade ago, “Permian is now relatively mature, and everyone knows exactly what’s there.” He predicts three to five more years of growth for production in the region; “after that, they’ll run out of the best stuff, productivity will start to degrade,” and producers will have to migrate to lower quality deposits. As they “eat through the high-quality fields,” the owners best able to exploit them will be majors like Exxon, which enjoy a lower cost of capital and are efficient enough to sustain production at lower oil prices than the smaller producers that made money by taking bets on the early prospects of shale: in part, McNally notes, because they have profitable downstream businesses like refining and petrochemicals.

“People are continually surprised at the resilience of U.S. production,” McNally observes, but as along as the best locations in the Permian hold out, analysts largely agree that the U.S. will stay dominant. While these high-quality areas last, big operators like Exxon and Oxy—with backing from its 26% owner, Berkshire Hathaway—will be ramping up drilling in the basin, Leblanc predicts; “the prices they are paying embed the idea that they’ll keep producing as efficiently as possible to keep cash flow coming.”

Most analysts do not predict that 2023’s wave of oil and gas deals will spill over into this year, however, since fewer likely targets are left in the Permian: and aside from Guyana, on which Chevron is betting heavily, there are also fewer attractive targets outside the U.S. “Russia is off the table for U.S. investors,” Dittmar notes, and while Canada’s oil sands are “interesting,” the reserve “requires bigger upfront spending and is received by investors as having a higher environmental cost.”

It’s possible, however, that the Permian will retain its attraction even after the best resources are pumped out, Leblanc argues. Variables that could keep production moving in lower quality deposits include higher oil prices, perhaps because of a more rapid recovery of China’s economy, and, as always, another technological breakthrough. Shale has a lower recovery factor than traditional hydrocarbon sources, he notes: only 9-11% of the original oil in place. “If they could figure out a way to raise that to even 15%, that could lead to yet another rejuvenation of the Permian.”