
All smiles in Tokyo?
The timing of last year's AVCJ Japan Forum was perhaps fortuitous - a matter of days before the event Unison Capital announced that it agreed to sell sushi chain Akindo Sushiro to Permira for $1 billion.
This transaction ticked several key thematic boxes: a big exit for a domestic fund (Unison generated a money multiple of 8x); a big deal for a international fund; a secondary sale; and a cross-border story (Permira plans to take the company into other markets in the region). It was also the second $1 billion deal of the year, coming after Bain Capital took 50% of Jupiter Shop Channel for $1.1 billion.
There was a renewed sense of optimism among panelists that there would be more activity along the same lines. The positive vibes have continued over the last nine months, with almost every regional buyout fund that invests in Japan saying - on the record or off, once or multiple times - that they expect to be more active in the country than in the last couple of years. For most of them, this isn't a big ask.
After a low-point of $5.2 billion in 2009, PE investment in Japan has reached $8 billion in each of the last three years, although buyout value only commanded a clear majority of total deal flow last year, accounting for more than 80% of $8.5 billion invested. The 2012 figure represents a high watermark because there were seven deals of $500 million or more, matching the 2007 figure. In the three years that followed, only nine transactions crossed this threshold.
Since 2007, global or regional funds that have joined the $500 million-plus club include: Bain Capital (three times), The Carlyle Group (twice), Permira (twice), MBK Partners (twice), Goldman Sachs, J.C. Flowers and Morgan Stanley Real Estate. To be fair, other usual suspects - such as KKR and The Blackstone Group - appear in the $200-500 million category, which saw two deals in 2012 and 23 between 2007 and 2011.
If the talk is to be believed, we will see greater representation in the larger ticket bracket. The caveat is apparent once the numbers are parsed a little further. Enterprise Turnaround Initiative Corporation has been responsible for one $1 billion-plus deal in the last three years and Innovation Network Corporation of Japan(INCJ) participated in two more. Indeed, the latter led the bailout of Renesas Electronic Corp. last year - a public-private capital hybrid, but a deal lost for foreign PE as KKR was thwarted.
Restructuring is the other key theme in the buyout funds' pitch; it often overlaps with the cross-border story in that private equity can help Japanese corporates with sluggish prospects at home access new pockets of growth overseas. However, it remains to be seen whether they will be allowed in, especially if expansion in certain areas means cutbacks in others.
Haruyasu Asakura, INCJ's chief operating officer, will be speaking at this year's AVCJ Japan Forum on whether his organization is a collaborator or a competitor with private equity. Will the positive vibes continue?
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