Riverside finds ideal Japan succession play in electronics

This is Riverside’s second deal in Japan, and the fourth investment from its Riverside Asia Fund. Per the terms of the agreement, Naka’s sole owner and Chairman Takakazu Kuroiwa will exit all of his holdings and retire from the business. He purchased the company from the original owner in 2006.

The deal takes the form of a prized succession play within the local commercial industry in emerging small-and-medium-sized-enterprises (SMEs) space – a deal type that private equity firms favor because it allows them to take control of the company and any new direction with little management pushback. But although Riverside now owns NAKA in full, the existing management team led by CEO Tsunaji Shinamura remains intact. The private equity firm said it will develop new product lines to leverage NAKA’s intellectual property and expand its applicability globally.

Tokihiko Mori, Riverside Operating Partner, told AVCJ that SMEs presented a number of attractive points as targets, including “the large numbers of potential deals in Japan.” He added, “We [are able to see] high return multiples from them by strengthening their financial position and operational efficiency.” There is also a social significance in participating in business successions and growth, with investment capital that could help develop companies to increase employment.

Riverside Partner Kiyofumi Nakano said that the firm aims to expand Naka’s portfolio of global customers by touting the company’s experience in meeting superior specifications, aided by the ongoing expansion of the wireless network market worldwide.

Mori explained NAKA’s unique market position,.“Demand in voice data transmission will continue to increase around the world. Naka is supplying high-end crystal oscillators for transmission equipment and the infrastructure segment, which requires exceptional accuracy. We expect to see demand from developing countries come online as well.”

According to analysts, the firm has distinguished itself by providing superior specifications in frequencies over 1GHz, and large global competitors cannot deliver the same specifications due to NAKA’s proprietary know-how and circuit design. The company is a leader in the low-phase noise crystal oscillator market using UM-type crystal units, which have lead terminals and are metal-sealed. These units are higher quality but difficult to mass produce. 

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• North Asia
• Buyouts
• Industrials