Advantage seeks $690m for sixth Japan buyout fund

The target – announced at the firm’s recent annual general meeting – was described as preliminary by LP sources. The vehicle has yet to be formally launched. Advantage recently sold a minority stake in its fund management entity to Tokyo Century Corporation, a local leasing business and a longstanding LP. The move was intended to facilitate succession planning and accumulate balance sheet capital.

Fund V, which closed at the hard cap in May 2017, represented a return to form for the private equity firm. Advantage raised JPY215 billion for its fourth fund in 2007 but then ran into difficulties after Tokyo Star Bank – the largest single investment – was surrendered to creditors. A JPY20 billion bridge vehicle was raised in 2013 as the firm worked on delivering the best possible outcome from Fund IV.

Twelve months ago, the fund was nearly fully exited and had delivered a gross multiple of 1.9x, thanks to exits such as Katitas, which buys and refurbishes single-family residential homes. Excluding Tokyo Star, the multiple was 3.4x. Meanwhile, the sale of massage chain Riraku in 2017 returned the entire corpus of the bridge fund on its own. From Fund V, Advantage has already secured a full exit from Iishi Sports and a partial exit from Net Protections.

The post-global financial crisis rebuilding process also saw the introduction of new strategies. In 2009, Advantage launched its first Inflexion fund, which makes 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. A second iteration is now being invested. Last year, the firm closed its first Asia ex-Japan fund – there is a Japan angle to most deals – at $380 million.

The proposed 25% increase in fund size seems relatively conservative when set against the ambitions of other Japan-focused managers. The Carlyle Group raised JPY215 billion for its second Japan fund in 2006, only to pare back the corpus JPY165.6 billion in response to weaker-than-expected deal flow. Fund III closed at JPY119.5 billion in 2015 and the target for Fund IV is said to be around JPY217 billion. Polaris Capital is looking to scale up to JPY120 billion – plus a JPY30 billion sidecar – from JPY75 billion last time.

These movements in the upper middle market come after Japan Industrial Partners (JIP) closed its fifth fund at JPY148.5 billion ($1.37 billion), including JPY46.2 billion for a co-investment vehicle. It represented a 120% increase on the previous vintage. However, smaller managers such as J-Star and Aspirant Group are looking to raise more money as well, motivated by similar expectations of more corporate carve-outs.

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