J-Star sees 3x return on consolidation play

The PE firm sold its 79.3% holding in the firm, alongside a 19.8% stake held by APS chairman Tsuneko Hibino, to Tokyo-based pharmaceutical firm Qol for JPY3.2billion ($40 million). The investment delivered a 3x money multiple.

J-Star and unnamed foreign investors bought a 66% interest in the company for JPY430 million in 2010. Founded in Tokyo in 1993, APS initially had four core businesses: contract sales, personnel deployment, medical representative training and medical dispensing.

With J-Star's support, the company acquired Synergy international, a provider of advertising content for healthcare professionals, in September 2010 and purchased a 40% stake in EBM, a clinical examinations specialist, last year.

This pattern of lateral acquisitions is driven by broader trends in the pharma sector. Cutthroat competition has forced pharma companies to focus more on drug development and so enlist the help of outside vendors to streamline costs. J-Star wanted to consolidate the vendor base.

"APS' clients include large pharmaceutical companies such as Takeda and Daiichi Sankyo. These companies have deep pockets, so there are a lot of service providers bridging the gap between them and the doctors they sell to," says Gregory Hara, director and president of J-Star. "The industry is fragmented and therefore a target for us."

Initial plans to list on the Tokyo Stock Exchange were abandoned last year due to public market volatility, which meant a trade sale was the logic exit route. The acquisition made sense for Qol because it is seeking to diversify its business and recognized a natural synergy between drug development and contract sales.

APS was the ninth investment from J-Star's $150 million maiden fund, which reached a final close at the end of 2007. The fund then made another healthcare acquisition, in-home care services provider HCM, KK, though a reported $30 million management buyout last year.

APS has now become the PE firm's second exit in as many months following the sale of lifestyle marketing company IkiIki in September. J-Star is now said to be closing in on a third exit.

It is hoped that decent returns on these investments will stimulate foreign interest in J-Star's second fund, which has a target of $245 million. "Japan has been hated for low performance in the past, but as long as there are GPs demonstrating good returns investors are interested."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Exits
• North Asia
• Healthcare
• healthcare
• Exit
• Japan
• J-Star