Japanese companies have always had a significant role in private equity, but typically as investors in private equity funds, not as the targets of blockbuster deals. As a recent Journal article shows, foreign private equity firms have had trouble executing blockbuster deals in Japan, having to settle for smaller action like taking minority stakes in Japanese companies, helping lead expansion efforts, and other similar small-scale investments. Still, private equity firms are always looking to break into the economy and do big deals with the massive conglomerates and attractive companies in the country.
Mostly, though, private-equity firms have been forced to nibble around the edges of Japan’s economy, due to several factors, say bankers, lawyers and private-equity executives.
Many companies in need of capital are more likely to turn to the government, suppliers, customers and even competitors for help than private-equity firms, they say. Also, Japan’s companies tend to have a protective view of their subsidiaries, profitable or not, and there are few activist investors to push companies to shed underperforming or ill-fitting businesses. In general Japanese corporate culture favors the status quo, shunning breakups, buyouts and other situations where private-equity thrives, they say.
Such is the cultural aversion to private-equity that it made for a hit televisions series in 2007, “Hagetaka: Road To Rebirth.” Hagetaka, which translates to “vulture,” was based on a novel and told the story of a foreign firm that snaps up local businesses, clashing with Japan’s consensus-driven corporate culture along the way.
“The opportunity in Japan for private equity has been and remains huge,” said Alex Emery, Asia co-head for Permira, a European private-equity firm. However, Mr. Emery said, “It could be beyond our productive lives before private equity in Japan comes to its full potential.”
Permira is one firm that has had some success making deals in Japan. The firm paid about $1 billion, including debt, for sushi restaurant chain Akindo Sushiro Co. Ltd. in September. Like Permira’s previous big buyout in Japan, a $2 billion-plus deal in 2008 for an insecticide producer, Sushiro was purchased from a local private-equity firm. Japan’s Unison Capital Inc., which made eight times its investment in the chain, was sold a stake of Sushiro as the company fended off a rival’s merger attempt. Source
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