Japan Buyouts – Locals Lead Private-Equity Revival

A decade ago, global private-equity firms like J.C. Flowers & Co. LLC brought buyouts to Japan, challenging longstanding relationships between corporate executives and their bankers with billion-dollar takeovers.

Today, the Western funds are more focused on chasing deals in faster-growing Asian countries, leaving the Japanese market dominated by local firms targeting investments in small and mid- sized companies. There have been 26 buyouts worth $1.4 billion in Japan this year, compared with 12 deals worth $3.5 billion in 2009, according to London-based research firm Preqin Ltd.

The success of local firms is paving the way to grow the private-equity market in Japan, where it took KKR & Co. four years to do its first buyout this year since entering the nation. Local funds including Ant Capital Partners Co. and Tokio Marine Capital Co. are raising money for fresh funds targeting small and mid-sized companies.

“The sweet spot for Japan’s private-equity market lies in the mid-to-small sectors,” said Joji Takeuchi, chief executive officer of Brightrust PE Japan Co., a Tokyo-based private-equity investment advisory firm. “The mega deals that took place around 2000 gave the wrong perception to overseas funds that Japan is a place for large-scale deals. Such investment opportunities are very rare.”

Read the rest of the story: Japan Buyouts Go Native as Locals Lead Private-Equity Revival.