Japan’s economy is going through tough times and the domestic consumer market is struggling with confidence. But Baring Private Equity Asia says the Japanese markets can still offer plenty of robust investment opportunities.
In a recent in depth analysis by the Wall Street Journal, Baring Private Equity Asia’s managing director, Tadashi Maruoka, said the private equity firm believes Japan offers opportunities for investors. Maruoka told the in the interview, “one effective way to achieve growth is to grab a larger piece of the pie in a certain industry and another is to tap into demand overseas.”
Successful Takeovers in the Past
Baring Private Equity Asia has already successfully tried this tactic in Japan. Primo Japan Inc., bridal jewellery store established in 1999, faced problems in expanding its profits as the market slowed down. Fewer Japanese people were getting married meaning Primo’s wedding ring sales stagnated.
Baring Private Equity Asia invested in the company in 2011 and took the company abroad. The company opened shops in Taiwan and Hong Kong with the help of the private equity firm. In the end, Primo’s Taiwan operations ended up being profitable on its own. Baring Private Equity Asia recently sold Primo to another private equity firm, Longreach Group.
In addition, the private equity firm has had success with another Japanese firm, Net Japan Co. The precious metal recycling company saw its profits nearly double during the two-year period Baring Private Equity Asia was in charge.
Continuing Investing in Japan
The private equity firm recently closed its fresh $4 billion fund aimed at the Asian markets. It is understood that the firm is looking to invest around 15% of the fund in Japan. Shane Predeek, another managing director for Baring Private Equity, told the Wall Street Journal the firm has previously made 25% return on average for its Japanese investments. The firm recently bought Bushu Pharmaceuticals for $670 million. At the time, we wrote about Japan’s expanding healthcare sector, which is proving to be a lucrative opportunity for private equity firms across the board.
Private Equity in the Country
There have been a few big developments in the private equity sector in Japan in recent months. One of the reasons behind the increased interest is due to the ease of lending. Maruoka said that acquiring leveraged buyout loans is much easier now than it was just a while ago, boosting private equity activity.
The Japanese markets also offer plenty of interesting opportunities for firms. We’ve talked about the interest towards the healthcare sector, but the Winter Olympics in 2020 are making the tourism industry an exciting opportunity as well. As an example, Bain Capital bought a hotel and spa operator Ooedo-Onsen Holdings in February. The Japanese company is among the most well-known in Japan.
It will be interesting to see whether other big private equity firms share Baring Private Equity Asia’s optimism over Japan, and whether the Winter Olympics of 2020 can generate more deals in the sector. Japan, as well as the whole of Asia, will continue to be the target for many private equity firms.