Advantage-owned Japanese funeral services business to go public

The company – formerly known as Epoch Japan – will sell up to two million shares, including an overallotment option, for JPY2,200 apiece. The offering will include 1.69 million shares held by Advantage, giving the private equity firm JPY3.7 billion of the JPY4.4 billion in proceeds, according to a filing. Its stake in Kizuna would fall from 97.6% to 50%.

Founded in 2000, the company owns and operates 79 funeral halls, up from 44 at the end of 2015, with a further 49 premises run by franchisees. For the 12 months ended May 2019, it handled 7,549 funerals, compared to 6,659 a year earlier. Most of these are set packages that vary by budget and scale, but there is increasing demand for customized funerals. Kizuna delivered 1,079 of these ceremonies in the 2019 financial year, more than twice the 2018 total.

Funeral ceremonies in Japan typically last at least two days and can include elaborate services such as praying monks. As such, focusing on premium services – such as family-customized food options, the production of memorial video montages and the formal organization of speeches that might not have otherwise been coordinated – was part of Advantage’s value creation plan from the outset.

“There’s a lot of opportunity to put soft value into this industry because the businesses are often managed in a very old-fashioned manner,” Daisuke Murakami, a partner at Advantage, told AVCJ in 2017. “The biggest angle for investment is customizing the funeral for each family and making the experience as memorable as possible by coordinating goods, services and performances associated with the deceased person.”

Industry consolidation was also identified as a key theme. Japan’s funeral services space is estimated to be worth JPY800 billion to JPY1 trillion a year. Growth is being spurred by an aging population – the number of deaths reached 1.3 million in 2015, up from 922,000 in 1995 – but the industry remains fragmented. The top 10 operators have a combined market share of just 3%.

Kizuna generated JPY7.19 billion in revenue for the 12 months ended May 2019, up from JPY6.42 billion a year earlier. Over the same period, net profit rose from JPY293.4 million to JPY406.4 million.

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• Topics
• North Asia
• Consumer
• IPO
• Japan
• Advantage Partners