Advantage closes seventh Japan buyout fund on $971m

It continues a recent scaling up in size with each vintage: Advantage raised JPY 60bn for Fund V in 2017 and JPY 85bn for Fund VI in 2020, although the latest vehicle is still some way short of Fund IV, which closed on JPY 215bn in 2007 but then ran into difficulty, prompting the firm to raise a JPY 20bn bridge fund in 2013 to rebuild its track record.

Several Japanese middle-market managers have pushed towards USD 1bn territory – or past it, depending on interest rate fluctuations – to address what they see as a broader investment opportunity. For example, Integral Corporation closed its fourth fund on JPY 123.8bn in late 2020 and Polaris Capital Group secured JPY 150bn for Fund V a year later. Each fund is at least twice the size of its predecessor.

Advantage’s latest fund received commitments from insurance companies, asset managers, banks, fund-of-funds, pension funds, and other institutional investors. Most were investors in the firm’s earlier funds.

Advantage said it would continue to focus on middle-market deals, such as founder-owner succession transactions, corporate carve-outs, and public-to-privates. The firm highlighted climate change, labour shortages, and inflation as areas in which it can leverage its expertise to help portfolio companies.

Recent carve-out success stories include spring water distributor CosmoLife, which was acquired from Orix Corporation in 2019 via Fund V and sold to Tepco in 2022 for a 12x return. CosmoLife rents out water dispenser units and delivers replacement bottles, targeting the home consumption market. Advantage extended the product offering by introducing water purifying dispensers.

Private equity investment in Japan reached USD 27.2bn in 2022 – a relatively small decline from the record USD 30.9bn deployed in 2021 – and USD 21.7bn has already been put to work this year. Large-cap deals, such as the USD 15bn privatization of Toshiba announced in March, are a key contributing factor.

There were four buyouts of USD 1bn or more in 2021 and five in 2022. Overall, Japan saw 87 and 116 buyouts, respectively, in these two years, which helps illustrate the size of the middle market.

Advantage, which is Japan’s oldest private equity firm, has established itself as a multi-strategy player in recent years. In addition to Japan buyouts, it has strategies focused on Asia ex-Japan buyouts, public companies that are open to receiving third-party investment but don’t want to be privatised; and renewables and sustainability.

In 2019, Advantage sold a 14.9% stake in its management entity to Tokyo Century Corporation, a domestic financial services company and a longstanding LP. This involved the purchase of new and existing shares. Since then, Tokyo Century has partnered with Advantage on several deals.

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• Topics
• North Asia
• Fundraising
• Buyout
• GPs
• Japan
• Advantage Partners
• Fundraising