Ex-Capital Dynamics executive gets Japan fund-of-funds mandate

The JPY6 billion ($57.4 million) fund-of-funds – known as SME M&A Fund – is part of a government effort to provide succession planning solutions to small and medium-sized enterprises (SMEs). MCP, as the general partner, will make commitments to between four and six private equity funds that focus on this area. It will also offer support in deal sourcing, fund operations, and raising additional capital.

“We believe the fund creates important social return by solving business succession issues while also creating an attractive risk-adjusted investment return,” said Shun Fujii, a managing director at MCP, in a statement.

During the 20 years to 2017, the average age of an SME founder increased from 47 to 66, according to Japan’s Ministry of Economy, Trade & Industry (METI). Only one-third of companies stay within the family as control is passed from the founding generation to the next, down from 75% two decades earlier. Nearly 40% of these businesses go to third parties with no ties to the family.

Asked about their succession situations, half of the founders who responded to METI’s survey said they intended to wind down their businesses. Just under 30% either had no children, could not find an appropriate successor in their family, or the younger generation had no interest in running the business. Over half of founders in their 70s and 80s do not have definite succession plans.

Growth in private equity deal flow in recent years – the number of buyouts rose from 31 in 2012 to 83 in 2016 before gradually falling back to approximately 60 last year, AVCJ Research’s records show – has been driven by succession situations and corporate carve-outs. Succession is the biggest contributor in terms of deal numbers, with most activity towards the small end of the size spectrum.

The MCP team tasked with managing the fund-of-funds was put together by Kobayashi and includes Hideaki Fukazawa, formerly chairman of Tokio Marine Capital, as a senior advisor. The Tokio Marine Capital team spun out from its corporate parent last year and rebranded as T Capital Partners.

Kobayashi spent nearly 10 years with Capital Dynamics, rising to head of Asia primaries coverage, before departing earlier this year. He started his career as a fund-of-funds investor with Mitsubishi Corporation more than 20 years ago. This was followed by a stint at domestic advisory group Alternative Investment Capital, where he rose to president and CEO.

MCP was founded in 1999 as Millennium Corporate Partners to provide asset management consulting services in Japan. It now has offices in Hong Kong, Chicago, Tokyo and Seoul and claims to be one of Asia’s largest independent alternative asset management firms. Its services primarily cover hedge funds.

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• Topics
• Fund-of-funds
• Fundraising
• LPs
• North Asia
• People
• Japan
• Capital Dynamics
• Appointments