Japan divestments still strong despite 'double-edged sword' of Abenomics

Folsom describes Abenomics - Prime Minister Shinzo Abe's economic stimulus package - as a "double-edged sword" for private equity. While the stronger macro environment might make corporations more confident of retaining businesses they might otherwise thought have divesting, others may find that balance sheet performance issues are no longer a constraint when it comes to selling off non-core assets.

"Over 15-17 years, regardless of positive or negative macroeconomic winds, the underlying fundamentals have meant large corporate parents still have an imperative to divest," he added. "We have maintained a dialogue with several corporate parents over long periods of time - most of the deals we've done with them have not come up all of a sudden but have developed over 6-18 months. We will continue these discussions."

Apart from corporate carve-outs, succession opportunities are still prevalent as Japan's ageing founder-owners consider transitioning out of their businesses. Stronger market sentiment might actually encourage deals because the valuations are better than a couple of years ago.

The vast majority of Advantage Partners' exits are via sales to strategic or secondary buyers. There have been four so far this year and another is in the pipeline. Of the three disclosed exits to strategic investors - Credge, 1st Holdings and United Communities - in each case the buyer was domestic. The secondary sale of Komeda's Coffee, however, was to South Korea-based regional buyout firm MBK Partners.

At the end of 2012, Advantage and Bain Capital also sold MEI Conlux to US strategic buyer Crane. Folsom claims the current environment is "the closest thing we've had to the period following the Asian financial crisis in terms of non-Japanese investors looking inwards to Japan."

However, this time around the pool of potential foreign buyers is broader. In addition to companies from the US and Europe, there is interest from China, Southeast Asia, South Korea and Taiwan.

For the unabridged version of Folsom's interview with AVCJ, please click here.

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• Topics
• North Asia
• Buyouts
• Exits
• Japan
• Advantage Partners
• buyout
• Exit
• Trade sale