Deal focus: Patience pays off for Trustar on Moritex

Machine vision lenses play a crucial role in the semiconductor manufacturing process, contributing to quality assurance by spotting the smallest scratches or defects on the surface of wafers. In 2015, Moritex was comfortably positioned as the second-largest player in the space globally. However, the company’s entire client base was in its home market of Japan.

“There was huge potential to expand overseas, especially to markets where labour costs tied to human inspection were rising,” said Masahiro Ito, a senior managing director and head of Japan private equity at Trustar Capital.

“We also saw an opportunity to cultivate other applications in the electronics and automotive industries, which were seeing increased demand for higher precision components and associated automatic inspection.”

This conviction underpinned Trustar’s JPY 1.8bn (USD 12.3m) acquisition of Moritex through a carve-out from German industrial technology business Schott. Now, nine years on, it has agreed to sell the company to NASDAQ-listed machine vision software specialist Cognex for about USD 275m. The holding period was protracted, but the private equity firm is said to have generated a 20x return.

Reorganisation was a key aspect of early work on international business development. Moritex comprised multiple companies – a Japan-based parent and standalone corporate entities in each overseas market. Spotting numerous misalignments of interest, Trustar acquired them all and created a single consolidated entity. This facilitated better cross-border collaboration.

China expansion was also a priority, given it is Trustar’s core market. The private equity firm relied on its knowledge to help Moritex create and budget a China growth plan and then leveraged its networks – Trustar has ties to local conglomerate CITIC Group – to cultivate clients and distributors.

The company began to shift manufacturing to China as early as 2002 with the establishment of a factory in Shenzhen. It accelerated under the new owner. Alongside a simplification of management systems and incentive schemes and closer control of the financing for individual projects, Ito credits this relocation with contributing to an improvement in profitability.

In 2022, the manufacturing footprint expanded into Vietnam, a response to increased demand but also a deliberate strategic move. “We thought we had better diversify the production base due to the recent global geopolitical tensions,” Ito explained. “Having production bases in China and Vietnam was a good fit for customer needs.”

There were at least 20 new product launches, primarily aimed at reducing Moritex’s reliance on semiconductors and flat panel displays. Gradually, high-end CCTV, smart factories and smart logistics, electric vehicle batteries, LiDAR, and advanced driver assistance systems (ADAS) became the main growth drivers. This dovetailed with a drop in the Japan share of sales from 80% to 60%.

“We successfully strengthened the company and demonstrated its resilience, but it took time,” Ito added.

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• Topics
• North Asia
• Industrials
• Trade sale
• Japan
• manufacturing
• semiconductor
• Trustar Capital