Advantage sells GP stake to Japanese strategic

Tokyo Century will take a 14.9% interest in the GP through the purchase of existing and new shares. Advantage will continue to operate independently and its investment decision-making processes will not change. The infusion of balance sheet capital from Tokyo Century – a longstanding LP in Advantage’s funds – will be used by the firm to “increase the quality of services it provides to investors and expand its capacity to invest alongside investors in funds,” according to a statement.

There is also an element of succession planning to the transaction. Taisuke Sasanuma and Richard Folsom, Advantage’s founders and co-representative partners, described it as part of a long-term evolution from a founder-controlled group to an institutional platform that can outlive its founders.

“We had already transitioned a portion of the firm’s ownership from the founders to non-founder partners and employees in the last couple of years, as well as transitioned governance and decision-making of the firm from just the two founders to include the broader group of partners and senior management,” they said.

Advantage is Japan’s oldest private equity firm, having been founded in 1992, before the introduction of legislation allowing financial sponsors to do buyouts in the country. The firm raised its first Japan-focused fund in 1997 and closed its fifth in 2017 with commitments of JPY60 billion ($535 million). There are also two funds that make minority investments in public companies that don’t want to be privatized but are interested in working with Advantage based on its value creation proposals.

Advantage now has approximately 45 investment professionals in Tokyo, Shanghai, Hong Kong, and Singapore. It established a team in Hong Kong in 2007 to help Japanese portfolio companies expand overseas and it began making investments outside of Japan in 2010. This ultimately led to the firm closing an Asia ex-Japan fund of $380 million in 2018. AVCJ understands that additional product expansions have been considered.

Tokyo Century is a diversified leasing business, supporting the purchase of equipment and fixed assets, among other financing solutions. It trades on the Tokyo Stock Exchange with a market capitalization of JPY525 billion. Revenue and net income for the 2019 financial year came to JPY1.1 trillion and JPY52 billion, respectively.

In addition to providing balance sheet capital, Tokyo Century will introduce proprietary investment opportunities to Advantage, share information on sectors in which it operates, and offer financing solutions to the private equity firm’s portfolio companies. Advantage will contribute management support expertise to Tokyo Century and introduce investment opportunities that fall outside the scope of its funds.

Few relatively mature private equity firms in Asia have sold GP stakes to outside investors; typically, these deals have come in the early years, as managers look to generate fundraising momentum. The global fund-of-firms players have so far targeted larger pan-regional firms, with Affiliated Managers Group (AMG) buying a stake in Baring Private Equity Asia and The Blackstone Group’s Strategic Capital Holdings Fund investing in PAG.

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• Topics
• North Asia
• GPs
• Investments
• Fundraising
• Japan
• Advantage Partners