Profile: New Horizon Capital's Yasushi Ando

It was 1996 and Yasushi Ando - now CEO of Japan's New Horizon Capital - was in Europe staring at a 149-foot-deep hole, a $3 billion debt mountain and 174 large chunks of paperwork. As part of the corporate restructuring team at Bank of Tokyo-Mitsubishi's investment banking division, Ando was one of four men charged with restructuring Eurotunnel, the ailing firm behind the eponymous subterranean link between France and the UK.

The four bankers - representing institutions from Europe, the UK, the US and Japan - had to bring together a consortium of 174 banks to refinance Eurotunnel. It was a thankless task. "It was quite difficult work for a non-native speaker," recalls Ando, "but it was a job that no other Japanese bank was willing to take up. I think during that whole period I never slept more the three or four hours a night."

The experience, grueling as it was, would prove valuable for what lay ahead in Ando's career. It also served as his induction into the world of private equity.

"At that time I hadn't experienced any kind of equity investment when engaged in corporate restructuring with Mitsubishi," he explains. "However, the US and European companies I worked with had actively utilized those functions so it was quite a new experience for me."

Cutting his teeth

Prior to going it alone, Ando had been with Mitsubishi for his entire career. As a graduate of the University of Tokyo, the bank sponsored his MBA at the University of Chicago. It was 1986, the year before the Black Monday global stock market crash. Japanese banks were among the biggest creditors to hard-hit US and European companies and a position with Mitsubishi's corporate restructuring team in London was to be Ando's first posting.

"I arrived during the last two years of the Thatcher administration and so there was a lot of privatization which kept us very active," he recalls. "Then, soon after, the US and Europe went into a recession so I got to experience quite a lot of corporate rehabilitation work."

Ando spent seven years in the UK before returning to a Japan wallowing in its own economic troubles. He was promoted to the number two position of the Mitsubishi's corporate planning division and built on the corporate restructuring experience he gained in Europe, this time dealing with Japanese companies.

"It was a tough time," he says. "Ironically the UK and US economy had recovered quite well but when I returned to Tokyo, Japan was experiencing its worst years."

In 2002, Ando had decided to set up his own fund. His decision was driven by two factors: a desire to make use of the experience he had built up in London and Tokyo; and frustration with the bureaucracy and slow decision-making of Japanese banks.

Phoenix Capital was launched with a small amount of his own capital, after which he starting raising his maiden fund. In the space of two months Ando leveraged pre-existing relationships to raise JPY20 billion ($200 million). Early backers included a number of local Japanese banks and Ando's former employer, Mitsubishi, which contributed $30 million. Another $30 million come from the Development Bank of Japan.

The investment thesis was in line with Ando's experience up until that point: failing companies in need of restructuring with an average ticket size of $20-30 million. The fund was sector-agnostic but manufacturing was a common theme. Over the next four years Phoenix would go on to raise a further five funds and end up with a total $3.2 billion in capital under management. However, by that time Japan was going through another change.

"By the end of 2006, there weren't many corporate restructuring deals because the Japanese economy had recovered quite well," says Ando. "We needed to establish another fund to widen our target, so we did a spin-off."

Ando formed Phoenix Capital 2 - later renamed New Horizon Capital - with a remit to invest in growth companies. But the timing would prove disastrous. The fund launched in 2007 and reached a first close of JPY5 billion, only to run into the global financial crisis.

Further fundraising was aborted and New Horizon focused on deploying what capital it had. The fund's first investment was Hitachi Housetec, carved out from Hitachi Chemical. The business was exited to consumer electronics retailer Yamada Denki in 2012.

"After we made an exit, we decided to go for a second fund that year and we have so far successfully raised $160 million, which is a good size" says Ando. "We have a huge pipeline of new investments so now we need to concentrate on that."

The bigger picture

Ando hints that a new vehicle may be in the pipeline for next year, but in the meantime he has been focusing his energies on the broader private equity industry. As an advisor on alternative investments to Japan's ruling Liberal Democrat Party, Ando has played an active role in pushing the country's public pension funds - including the Government Pension Investment Fund (GPIF) - to increase their allocations to private equity.

"Because of the lack of venture capital and private equity in Japan there are a lot of zombie companies surviving," he says. "To change that situation we need encourage venture capital and private equity by introducing pension fund money."

He has even written a book in Japanese on the topic - "How vulture funds will restore the economy" - which outlines his private equity manifesto for Japan's recovery.

"We need to educate people on PE and VC and how important these funds are," he says. "I hope by the time we raise our next fund we can have a discussion with GPIF about private equity opportunities - not only for our own sake, but for others in the industry too."

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