Japan’s mergers and acquisitions (M&A) market is set to sustain strong growth into 2026, driven by innovative financing structures leveraging private capital, according to Goldman Sachs. Executives say larger deal sizes and creative funding solutions are enabling companies to pursue acquisitions without overextending their balance sheets, fueling one of the most active M&A environments in Japan’s recent history.

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Private Capital Financing Driving Deals

David Dubner, Goldman Sachs Chief Operating Officer for Global M&A and Head of M&A Structuring, explained that Japan’s largest corporations are streamlining portfolios and targeting growth investments, with private capital providing critical support for deal-making.

These high-grade financing structures combine equity, debt, and private credit sourced from long-term capital, such as insurance funds. By maintaining investment-grade credit ratings when partnering with large corporates, these models significantly reduce capital costs and increase deal feasibility.

Dubner noted that these strategies are not only boosting Japan’s domestic M&A activity but are increasingly applied globally to finance AI-related data centers and power infrastructure projects.

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Notable Deals and Market Impact

A notable example of such financing is the $7.4 billion buyout of Air Lease Corp in September, where Sumitomo Corp and SMBC Aviation Capital collaborated with asset managers Apollo and Brookfield, with Goldman Sachs serving as adviser.

Private equity firms, particularly those with insurance capital arms, are actively seeking opportunities, partnering with strategic buyers to provide capital beyond traditional equity and debt financing. Dubner emphasized that this approach is expanding the range of viable buyout targets for Japanese firms, including businesses previously considered too large or risky.

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Future Outlook for Japan M&A

Dubner predicts bigger deals ahead, noting that many blue-chip Japanese firms still hold sizeable non-core assets, which trade at a conglomerate discount despite ongoing efforts to improve shareholder returns. Activist investors and Tokyo Stock Exchange initiatives are increasing pressure on companies to pursue corporate governance reforms and unlock shareholder value.

Since the 2017 regulatory changes allowing tax-free spin-offs, Japan has seen limited uptake, but Dubner believes this “dam will open,” enabling a surge in transformational M&A activity.

Goldman Sachs expects global and Japanese M&A momentum to continue for the next two to three years, supported by low interest rates, abundant capital, and growing appetite for transformative deals.

“Our global clients are thinking bigger, and transformational M&A is increasingly on the docket,” Dubner said.