Bain launches Japan fund

It was first reported last year that Bain was in discussions about the prospect of raising a Japan vehicle. AVCJ learned of the official launch and target size from sources in the LP community.

The private equity firm is currently deploying its fourth Asian private equity fund, which closed at the institutional hard cap of $4 billion in late 2018. Employees of the firm and related parties will contribute a further $650 million. This compares to $3 billion in the previous vintage.

Bain’s pan-regional strategy involves making equity investments of $100-400 million, but the GP has previously demonstrated flexibility in Japan, moving between mid-cap and large-cap transactions. The country has always been one of its most active geographies, accounting for a larger portion of the fund corpus relative to most Asian peers.

In 2018, a Bain-led consortium completed a $18 billion acquisition of Toshiba Memory Corporation, which remains Asia’s largest buyout deal to date. At the other end of the spectrum, two years earlier, the private equity firm purchased mushroom producer Yukiguni Maitake for a mere JPY9.5 billion ($86 million). Bain fully exited the business last month through an IPO.

More recently, the firm has been involved in a flurry of tender offers. It bought aged care provider Nichii Gakkan and aircraft interiors manufacturer Showa Aircraft Industries for enterprise valuations of JPY122 billion and JPY90 billion, respectively. The firm is currently working on a JPY39.7 billion buyout of pharmacy chain store operator Kirindo Holdings.

The Carlyle Group is the only other global GP pursuing a Japan strategy alongside a pan-regional fund. Its fourth Japan buyout fund closed earlier this year on JPY258 billion, more than twice the size of its predecessor. Meanwhile, the likes of The Blackstone Group and Apollo Global Management are devoting more resources to the country. Both firms recruited Japan-based investment professionals from Bain to lead these efforts.

Several local managers are looking to scale up their fund sizes to pursue larger corporate carve-out deals. Polaris Capital Group is targeting JPY150 billion for its fifth fund, including a JPY30 billion sidecar, having raised JPY75 billion in the previous vintage. Integral Corporation is expected to move from JPY73 billion to around JPY100 billion. Japan Industrial Partners already took the step up, closing its latest fund at JPY148.5 billion in 2018, compared to JPY67.4 billion for the predecessor.

Over the past five years, the annual average number of M&A deals involving Japanese sellers of Japan-based assets exceeds 450, according to AVCJ Research. The most prolific buyers are other local corporates; private equity penetration is minimal. The average number of PE buyouts during the same period was 70, of which 17 were carve-outs. Prior to 2015, the carve-out total barely exceeded single digits; it rose thereafter, although 2019 reverted to this historical norm.

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• Topics
• North Asia
• Fundraising
• Buyout
• GPs
• Bain Capital Asia
• Japan