Rising Japan exits staffing services business

The GP acquired a 100% interest in Progress in July 2019 for an undisclosed sum. The investment was made via Rising Japan Equity No.2 Investment Enterprise, which closed at JPY30.75 billion in 2016.

UT Group supplies employees to clients operating in areas such as manufacturing, construction, and design and generated JPY102 billion in revenue for the 2020 financial year. It has been acquiring smaller businesses to create a broader, multi-region platform, and manufacturing - Progress' specialty - is a key focus area. 

Last week, UT Group purchased a 20% stake in Aki-Japan, an employee training service provider for construction companies, from J-Star. The private equity firm retains 80%. 

 

UT Group said in a filing that COVID-19 has weakened the employment situation in Japan, and it expects a structural shift in employment policies going forward, with companies looking to be more agile in their approach to staffing. 

“At present, personnel demand, particularly in the manufacturing industry, has been recovering significantly, as production activities, particularly in the semiconductor and electronic parts sectors and automobile-related sectors, have been recovering and the long-sluggish jobs-to-applicants ratio has bottomed out,” UT Group said.

Progress primarily operates in Aichi prefecture, serving automobiles, automotive parts, electronic parts, and rubber products manufacturers. It has approximately 1,100 Japanese and non-Japanese dispatch workers on staff. Sales reached JPY4.57 billion in 2020, up from JPY3.76 billion a year earlier. Over the same period, net profit fell from JPY82 million to JPY67 million.

Several Japanese private equity firms have targeted human resources outsourcing as a means of capitalizing on the country’s demographic-driven labor shortage. The workforce will number 52.4 million by 2040, down from 65.3 million in 2017, according to government studies. There is an expectation that companies will outsource functions they haven’t the resources to perform in-house.

Last year, CLSA Capital Partners sold Qit, a staffing services player focused on engineering, to Advantage Partners. Revenue and headcount both roughly doubled during the holding period, which saw four bolt-on acquisitions. A year before that, The Longreach Group exited Nippon Outsourcing Corporation, a business process outsourcing specialist, to a local strategic, generating a 2.7x return.

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• Topics
• North Asia
• Support services
• Industrials
• Trade sale
• manufacturing
• professional services
• Rising Japan Equity
• Japan