Japan's Keystone targets $440m for Fund V

Pre-marketing for Japan Revival Sponsor Fund V has already begun with a view to reaching a first close in mid-2022, Tomoaki Tsutsumi, Keystone’s representative director, told Mergermarket, AVCJ’s sister title.

“A number of companies are seeking management support to drastically review their businesses to be prepared for the post-pandemic world,” Tsutsumi noted, highlighting opportunities in retail.

“Such companies should be worth investing in if we can lead the industry restructuring – retailers are now keen on M&A to diversify their business portfolio to obtain technologies, corresponding to the change in customers’ needs. We can implement our knowhow and help them to achieve digital transformation, in order to utilize their customer base efficiently.”

Keystone closed its fourth fund in early 2020 with JPY32.2 billion in commitments, Tsutsumi added. The vehicle is about 50% deployed. The bulk of the firm’s investments are structured as debt, which offers more downside protection – as well as scope to assume control – in turnaround situations. The average duration of its investments is less than two years.

Typical operational improvement initiatives include balance sheet restructuring, strengthening management teams, and improving bottom-line performance. Keystone has been especially active in the consumer sector, with investments in the likes of cosmetics manufacturer Avon Products – exited in 2018 – and handicraft business Fukikyu.

“We stick to private debt investment as we can receive the repayment of the loan from unlevered cash flow before taxes,” Tsutsumi said. “We have continued to generate profits for the last 11 years, so our approach would not be wrong.”

In October 2020, SBI Holdings announced it would acquire a 33.4% stake in Keystone through SBI Financial Services. Tsutsumi and co-founder Satoshi Koyama together retain 51%. SBI also agreed to anchor the private equity firm’s funds, making LP commitments of JPY10 billion.

There is collaboration on certain investment opportunities, partly through SBI’s regional financial affiliates. In June, they backed Japan’s largest solar power generation project in Okayama.

Tsutsumi told local media in 2020 that Keystone was looking to list on the Tokyo Stock Exchange within two years. Speaking through a media relations agency, Keystone declined to comment on its IPO plans.

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• Topics
• North Asia
• GPs
• Fundraising
• Restructuring
• Credit/Special Situations
• Japan
• Keystone Partners