Japan's INCJ in cooperative talks with private equity

Haruyasu Asakura, chief operating officer of INCJ, who will be speaking at the AVCJ Japan Forum later this week, told Mergermarket that he believed partnerships between his fund and global buyout firms such as KKR and The Carlyle Group could be a a possibility in the future.

The comments come just months after INCJ drew fire from the Japan Private Equity Association (JPEA) - of which KKR and Carlyle are members - which criticized state-backed funds for crowding out opportunities by behaving more like pure investment funds, adding that they potentially delayed the restructuring process for struggling companies.

Many of these concerns had been triggered by INCJ's JPY150 billion ($1.8 billion) bailout of chipmaker Renesas Electronic Corp which had frustrated plans by KKR to invest JPY100 billion in the company.

If such joint investments where to emerge however, Asakura added that there would be certain caveats. For example, when targeting a domestic company, private equity firms would have to cater to INCJ's investment strategy. This, he says, is because of "fundamental cultural and investment differences."

He also noted that the typical investment period for INCJ is longer than that of private equity funds. In addition it thinks more about long-term impact on an industry even after exiting the portfolio company. If a global fund can customize its investment criteria, he said, opportunities will emerge in Japan.

This echoes a sentiment expressed by Masahiko Fukasawa, a managing director with advisory firm AlixPartners, in an interview with AVCJ earlier this month. He said one way forward for GPs seeking restructuring deals is to work alongside domestic financial institutions - including government-backed funds - with the rationale that local institutions bring not only capital but also local connections and knowledge.

"For PE funds, having a majority alone are a great story but if you only chase the best story you are narrowing down the options," Fukasawa said. "A PE firm has a unique capability for bringing in the kind of experienced management and valuable advice that is required for turning around these companies. Non-Japanese firms should consider the option of working with domestic players."

The AVCJ Japan Forum takes place June 27-28 at the Conrad Tokyo.

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• Topics
• North Asia
• Buyouts
• Japan
• buyout
• Innovation Network Corp. of Japan (INCJ)