Shearman & Sterling and Japanese firm TMI Associates have represented the world’s largest automaker Toyota Motor Corp on its $3 billion all-stock deal to buy out the rest of minivehicle unit Daihatsu Motor Co, which turned Mori Hamada & Matsumoto for advice.

The companies intend to develop Daihatsu into a global brand as they focus on growing markets for compact cars, noting that entry-level car markets were expanding due to economic development and that vehicles were becoming smaller due to environmental and traffic concerns.

Acquiring full control of Daihatsu, of which Toyota currently owns 51.2 percent, will allow it to better leverage the lower-cost brand and enable Daihatsu to more easily adopt next-generation technologies developed by Toyota.

As part of the deal, Toyota will acquire the remaining Daihatsu shares by swapping 0.26 of its own shares for each Daihatsu share.

Mori Hamada’s M&A partners Satoko Kuwabara and Hirokazu Hayashi advised Daihatsu on the deal. Shearman & Sterling team led by Tokyo capital markets partner Masahisa Ikeda and Menlo Park tax partner Larry Crouch advised Toyota.

In Asia, Daihatsu holds 16.2 percent market share of the passenger car market in Indonesia and operates under a joint venture in Malaysia. The acquisition is part of Toyota’s strategy to strengthen its push into compact cars for emerging markets.