Deal focus: NSSK completes digital transformation

NSSK’s acquisition of Bunkasha Publishing in 2017 was rooted in the founder’s recognition of himself as an analogue mind in a digital age. “He was a classic manga editor, a pencil-licking editor who smoked cigarettes in the back room. He said, ‘The world is going digital and I don’t even own a smart phone – I have no business running this,’” recalls Jun Tsusaka, NSSK’s founder and managing partner.

The private equity firm made digitization a priority from the start of its ownership. A senior digital transformation specialist was hired from Rakuten and built up a 15-strong team that moved Bunkasha’s entire manga library from paper to the cloud. It was not a straightforward process.

“You have cultural resistance from everyone who grew up in a print tradition,” Tsusaka explains. “We have a stable of authors who like to see books in print, even though we proved to them that every time we printed a new hard copy of a manga publication, we were losing money. And its money that could be used for other things.”

Following its transformation, Bunkasha’s EBITDA margin rose to 15-20% compared to 2-4% for traditional publishers that are beleaguered by legacy offline assets. NSSK was happy to hold the asset and reap the rewards of double-digit revenue growth, but local internet content provider Beaglee came in with an offer too good to refuse in the current circumstances. Beaglee claims to have paid JPY5.3 billion ($51 million) in equity for the business and secured debt funding of JPY7 billion. NSSK is on track for a 3x money multiple, according to a source familiar with the deal.

Beaglee – operator of “Manga Kingdom,” a distributor of content created by third parties – wants Bunkasha’s intellectual property to bulk up its unique product offering in a competitive marketplace. The acquirer is getting a specialist in manga for female audiences, best known for Stepmom and Daughter Blues,” which was turned into a popular TV drama series.

Manga is a significant literary presence in Japan, a format that cuts across all genres. Readers are increasingly consuming it through digital channels – a trend accelerated by COVID-19 – with the market reaching JPY259.3 billion last year, according to the All Japan Magazine & Book Publishers and Editors Association. It has grown 24% over the past five years, while the paper products segment has declined by 8%. It was worth JPY238.7 billion in 2019.

Manga for female audiences represents a niche, but not necessarily a small one in absolute terms. There are four sub-segments and Bunkasha has a 10-15% market share in each one, says Tsusaka. The target reader base is 20-55 years of age.

This is the second exit from NSSK’s second fund, which closed at JPY60 billion in 2017. Tsusaka says he would happily invest in manga again: “We’ve proven our ability to do a digital transformation of an analogue content business. We want to reenact the same play. We have a playbook now and we have access to management that can execute such a transformation.”

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• Topics
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• Trade sale
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• NSSK