JAIC spin-out seeks VC secondaries

First, pan-regional funds are scouring the portfolios of mid-market players for portfolio companies that have been scaled up and are now looking to expand overseas. Unison Capital's exit of sushi chain Akindo Sushiro to Permira last year and Advantage Partners more recent sale of Komeda Coffee to MBK Partners are good examples.

Second, specialists are reaching out to lower mid-market Japanese GPs - typically those that are currently fundraising and want to return capital to LPs or those that are unable to fundraise and want to jettison legacy portfolios - for secondary buyout opportunities. 

Former JAIC CEO Moriyoshi Matsumoto, who was responsible for the group's secondaries business for more than a decade and has just spun-out to form his own firm called WM Partners, fits in neither group

"There are a lot of opportunities for the traditional mid-market secondaries but we are more about investing in emerging companies that are trying for 10x sales growth in 2-3 years, typically in the IT sector and related industries," Matsumoto says. "In the last couple of years we have seen a lot of angel investors appear in Japan who are good at managing companies in the early stages.

We would come in and help take these companies to the next level." He notes that there is a big gap in the market for private equity players to work with companies in between the pre-IPO and seed stages, providing capital and operational value-add.

In addition to targeting VC funds at their tail end of their lives that are looking for liquidity or support for portfolio companies, WM will focus on corporations keen to trim their risk exposure on strategic investments and financial institutions that, through regulatory requirements or management policy, are required to divest holdings.

The GP is targeting up to JPY10 billion ($102 million) for its debut fund, with a first close likely to come this summer. Participants in the first close - of $40-50 million - will be Japanese institutions. Foreign investors will then be targeted, with a view to a final close towards the end of 2013, although Matsumoto is only cautiously optimistic, citing the challenging fundraising environment.

The last fund the WM team managed while part of JAIC had a corpus of JPY8 billion. Over a period of 10 years, the team invested around $120 million and delivered a 2.7x return. Backers included Development Bank of Japan and institutional investors such as insurance companies and trust banking corporations. These groups are being approached to re-up in the new vehicle.

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• Topics
• North Asia
• Fundraising
• Secondaries
• Japan
• Secondaries
• Fundraising
• JAIC