GPs upbeat on ailing Japan

Attractive valuations, positive signs of change on the public markets and the potential for management restructuring are a few of the factors contributing to a renewed sense of optimism. 

"Japan presents a very attractive investment opportunity for a number of reasons." John Ehara, a founder of Unison Capital, told the Hong Kong Venture Capital and Private Equity Association's (HKVCA) Asia forum on Wednesday. "What is most appealing are the attractive valuations that are available to us. Typically price we pay 5-7x EBITDA and this is extremely attractive in the context of valuations you have to pay in other markets."

He added that quite a few companies were "less than optimally managed" in the country, potentially presenting GPs with a lot of "low hanging fruit."

Hidemi Moue, CEO of Japan Industrial Partners added that, while Japan had seen its GDP contract, large conglomerates facing fierce global competition had started to look at shedding subsidiaries as they shifted focus onto their core businesses. The most recent example of this was Panasonic divesting Sanyo Electric's digital camera unit to Advantage Partners in December.

"What we saw last year was a wake up call for the managers of these large companies," said Ehara. "Look at Panasonic, not so long ago there were formidable, but they have lost all their money they are more serious about taking proactive action."

Moue also pointed to better macro-economic indictors over the last three months. "Looking ahead, we have new government that is pro-business," said Moue. "The Nikkei stock market has already rebounded by 50% since last November and the yen has recently weakened from JPY80 to the dollar to JPY90."

Ehara warned there may be more macroeconomic hype than hope, but Unison's pipeline has been strong and that many Japanese GPs are seeing the same thing. 

Speaking forum's closing keynote Joe Bae, head of Asia for KRR, said his company had made one in investment in Japan during the global financial crisis, when it acquired recruitment services firm Intelligence from Usen Corp. for JPY32.5 billion in 2010. KKR has not seen compelling risk-reward from the Japanese market over the last six years, but Bae expects this to change over the next several years.

"Its not that the country lacks capital," said Bae. "It lacks operational best practice and management capabilities in certain companies, and it lacks the ability to grow businesses outside of the core market."

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• Topics
• North Asia
• Buyouts
• Unison Capital
• KKR
• Japan Industrial Partners
• Japan