The JPY 903bn (USD 5.8bn) uplift Elliott Management forced Toyota Fudosan to pay over its original JPY 6.2tn Toyota Industries buyout offer dwarfs earlier activist-driven bid bumps in Japan.

Yet some observers argue the revised offer, which was accepted by Elliott, still undervalues the Toyota subsidiary – a sign that Japan’s governance reforms, and the activist opportunities emerging from them, may still have a long runway.

Indeed, it’s curious why it required the world’s leading mega cap activist investor to build an effective blocking stake in Toyota Industries before Toyota Group agreed to pay a fair price for the subsidiary. After all, hasn’t Japan undergone a decade of increasingly significant corporate governance reforms?

As our data shows, the bidder’s increased outlay amounted to USD 5.42bn more than the USD 371m that activist Effissimo recently forced Core Inc to add to its offer for Pacific Industries – the previous highest activist enforced revision by equity value.

Financially, it marked a major win for the activist generating an approximate 20% return on its USD 2.6bn bet over the span of a few months. More broadly, Elliott has further enhanced its reputation as a mega cap specialist and shown that Japan’s most powerful conglomerates can be forced to do the right thing by shareholders.

Still, several analysts and commentators have argued the revised offer continues to undervalue Toyota Industries considering the latter’s minority shareholding interests. Some said the outcome was “hardly a stunning victory for governance”.

That’s remarkable, considering the revised bid came at a near 60% premium to Toyota Industries unaffected share price prior to news of the initial bid. The premium lays bare the depth of the conglomerate discount the market had assigned to the unit.

Ultimately, the episode simultaneously raises questions about the impact of Japan’s governance reforms and highlights just how much activist opportunity remains in the market.

Indeed, activist activity in Japan continues on an upward trajectory, cementing the country’s status as the world’s second-most active market behind the US for shareholder activism.

Year-to-date, activists have made disclosure filings against 194 companies – equivalent to 53% of last year’s total of 367 companies, as per Dealreporter data. In 2025, activists made 1,656 filings in total, up 20% from 1,379 in 2024 and nearly double that of 2021.

As the data shows, activists are targeting companies of all sizes but it’s notable they are increasingly prepared to agitate against companies valued above USD 1bn. As reported, activism among large cap companies has nearly doubled in the past five years.

The country’s attraction to activists owes much to the returns on offer. Three years ago, an analysis by this news service of 20 major activist campaigns in Japan found that funds were generating an average annualised return of 15%. An updated similar assessment finds this annualised return has increased to 18%.

As shown in the chart below, the overall returns for these investments are significant with the most successful including Effissimo’s bets on Kawasaki Kisen Kaisha and Dai-ichi Life – the longest-held positions in our review, spanning more than a decade.

*Cases selected from activist filings involving companies with market caps above USD 1bn

The future of Japanese activism

One could argue the opportunity to find undervalued companies in Japan is diminishing fast.

The TOPIX index has risen 91% since January 2023, which is when the Tokyo Stock Exchange called upon companies trading below 1x Price-to-Book to address their underperformance.

As of today, approximately 14% (109) of companies trading on the prime market with market values above USD 1bn are trading below 1x Price-to-Book Value, according to Eikon data. This percentage is well below the 43% of the Topix 500 that traded below 1x PBV in July 2022.

It suggests there are far fewer attractive undervalued investments than three years ago.

But look at the MSCI World Index’s performance since January 2023 – it’s up 83%, which is not far off the TOPIX. And just because a company trades above 1x PB does not signify the company is necessarily trading anywhere near fair value.

In 2025, for example, activist filings targeted 77 companies valued above USD 1bn and of these, 71% (55 companies) traded above 1x Price-to-Book.

Further, there are plenty of activist opportunities in the sub 1bn market cap basket. Just ask activist Evo Fund which has made filings against 37 companies most of which are below USD 100m in market value.

No time for self congratulations

Elliott was somewhat muted in its appraisal of its Toyota Industries campaign calling it “an improved outcome for minority investors”. The activist instead focused on how the outcome will “promote the unwinding of cross shareholdings within the Toyota Group and across the Japanese market.”

Automakers remain a key pocket of undervaluation, with Nissan, Mazda, Honda and Mitsubishi Motors trading well below 0.6x PBV, alongside affiliated suppliers such as Subaru, Aisin, JTEKT, Stanley Electric and Aichi Steel.

While parent level consolidation among major automakers remains challenging, as evidenced by last year’s collapse of talks between Honda and Nissan, momentum is likely shifting downstream. As Toyota Industries moves toward delisting, consolidation pressure may cascade into the broader Toyota keiretsu, particularly among autopart suppliers.

A few to watch are Toyota Boshoku, the group’s automotive interiors specialist, in which Toyota affiliated entities collectively hold 44.8%. Trading at roughly 1x PBV, it represents the highest ownership stake the Toyota group maintains in any listed affiliate, making it a logical candidate for future structural simplification or potential take-private activity.