Japan PE to benefit from new corporate 'psychology' - AVCJ Forum

Masamichi Yoshizawa, representative director and partner with Longreach Group, told the AVCJ Japan Forum that corporate carve-outs are on the rise but the main drivers are not simply related to recent government economic reforms - they are the product of a fundamental change in the mindset of Japanese corporations.

Among the numerous deals to take place in the past year, Yoshizawa cited his own firm's acquisition of Hitachi's precision drilling business as well as KKR's purchase of Panasonic's healthcare unit, and Japan Industrial Partners' acquisition of both internet service provider Biglobe from NEC and Sony's loss-making Vaio PC division.

"The typical explanation for this is Abenomics; businesses are doing well and the weakening of then yen means now is the right time to sell the divisions, but I don't agree," he said. "Actually, corporations now have a more urgent sense of crisis as they know they cannot depend on Abenomics, alone. They feel they have to be strategically prepared now and that is the new psychology among the management we are seeing now."

However, this is not the only change in thinking that private equity is benefiting from. Some GPs see founder-owners with succession issues becoming more receptive to the prospect of having a private equity partner.

"When we used the term ‘M&A' in the past it had very negative associations with corporate raids and selling out your family - so it was a bad fit for Japanese sensibilities," said Naoto Mizoguchi, managing director at DRC Capital. "But now many owners of the family-owned businesses are receiving advice that selling to a private equity fund can be an option and many others are doing it."

Tamotsu Adachi, managing director and co-representative with The Carlyle Group, agrees that now Japanese private equity has built up a track record, its role can be better understood by family-owned businesses. However, he cited Carlyle's recent acquisitions of health and nutrition contract manufacturer Sunsho Pharmaceutical as an example of the importance of still being able to build trust with promoters.

"The founder had a number of concerns, but most of all he was concerned about his employees and whether they would be able to maintain their livelihood, so we needed to offer some guarantees," explained Adachi. "On the other hand, he wanted the company to continue to grow and we were to support that growth."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• North Asia
• Buyouts
• Japan
• M&A
• buyout
• The Carlyle Group
• DRC Capital
• The Longreach Group Limited