Japan's Integral files for IPO

Few Asia-based private equity firms have gone public and none of meaningful size. PAG, a pan-regional player with USD 17bn in assets under management, filed for a Hong Kong IPO in March 2022 but the offering has since been put on hold. It was also suggested that Japan-based Advantage Partners might pursue a public offering after the firm sold a stake to an external investor in 2019.

Integral will issue about 8.6m shares at JPY 2,800-JPY 3,400 apiece; existing shareholders currently hold 2.3m shares. The tentative listing date is September 20, according to a filing.

Selling shareholders include Nobuo Sayama, one of four founding partners at Integral. Sayama and Reijiro Yamamoto are the two largest shareholders with 35.64% and 32.62%, respectively. Kensaku Mizutani has 9.05% and Yoshihiro Henmi has 7.12%.

Integral was founded in 2007 and has raised four funds to date. Recent vintages have seen significant increases in vehicle size: Fund III was 65% larger than Fund II, and Fund IV - which closed at the hard cap of JPY 123.8bn in 2020 - was 69% larger than Fund III.

Pursuing a mid-market buyout strategy largely driven by founder-succession situations, corporate carve-outs, and take-privates, Integral distinguishes itself by putting balance sheet capital into investments alongside fund commitments. Principal capital accounts for up to 20% of each deal, and the firm would like to increase this percentage, according to a prospectus.

A portion of the IPO proceeds will be used to augment balance sheet capital. The rest will support bridge financing for portfolio companies and go towards GP commitments to future funds. The prospectus noted that Fund V will likely be established in the near future, with the GP commitment due in 2024.

Recent deal activity by Integral includes the acquisition of smart devices supplier United Precision Technologies (providing an exit for Advantage Partners) and the sale of IT consulting business BTC to Capgemini. Pricing details for those transactions were not disclosed.

In addition to the four founding partners, Integral has 67 employees of which 40 are investment professionals. As of end-2022, the firm had total assets - not including funds under management - of JPY 34.9bn. Revenue for the year came to JPY 5.4bn, up from JPY 3.8bn in 2021, and net profit rose from JPY 1.1bn to JPY 2bn.

The proposed IPO comes amidst observations that Japan’s stock market is trading at attractive levels in depreciated yen environment. This has coincided with a general warming trend in Japan in terms of international interest in the country versus more volatile markets in Asia.

Meanwhile, Japan’s private equity market has confounded the sharp decline experienced region-wide from the record high of 2021. Investment in Asia – across all private equity strategies – fell by more than one-third in 2022; Japan was down 12%.

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• Topics
• North Asia
• GPs
• Japan
• Integral Corp.
• IPO