PE investors rue lost Japan carve-out opportunities

Speaking at the Hong Kong Venture Capital and Private Equity Association's Asia forum, Richard Folsom, representative partner with mid-market buyout firm Advantage Partners said despite the number of subsidiaries and divisions held by Japan's large electronics conglomerates numbering in the hundreds - if not thousands - private equity had only scratched the surface.

"With movement in the exchange rates and the weakening of the yen, lots of large corporations see themselves as more stable now and are under less pressure to undergo restructuring," he said. "So they are likely to delay a lot of the divestments that a lot of people have been hoping for."

He added that while there have been some clear exceptions - KKR last year bought Panasonic's healthcare unit for JPY165 billion ($1.66 billion) while Advantage bought its Sanyo Electric digital camera business a year earlier - he expected future deal-flow to be "lumpy."

On the other hand, Folson said founder-owner succession opportunities will continue to be a staple of private equity deal flow in Japan - six out of the last eight deals closed by Advantage fell within this category - even if individual deals continue to be relatively small.

This sentiment was echoed by Yasushi Ando, CEO of New Horizon Capital, who added that entrepreneurs are becoming increasingly open to the idea of selling to private equity.

"For a long time the Japanese founder has hesitated to sell his business as he has spent years building the company and he feels responsible for his employees," he said. "But recently the situation has changed and a founder is more willing to sell his business and enjoy his retirement. People are starting to understand the benefits of selling to a fund."

 

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• Topics
• North Asia
• Buyouts
• Japan
• buyout
• Advantage Partners
• New Horizon Capital