Japan’s hot buyout market is still a slow burn — TradingView News

If Seven & i 3382 was the sole yardstick for Japan’s M&A push, the collapse of Alimentation Couche-Tard’s ATD $46 billion bid would bode ill. Even so, evidence suggests financial buyouts in the $4 trillion economy have more than held up — even if hopes for faster deal flow face stubborn constraints.

A succession of three jumbo-sized announcements attests to robust demand: on August 6, Blackstone BX flagged its largest-ever offer in Japan of $3.5 billion for engineering staffing firm TechnoPro 6028. A week prior, elevator and escalator maker Fujitec 6406 agreed to sell itself to Sweden’s EQT EQT for $2.7 billion, also marking the firm’s biggest Japanese acquisition. The same week also saw KKR KKR lead a $2.3 billion tender offer for optical equipment firm Topcon 7732.

Further underscoring Japan’s private-equity Goldilocks moment, KKR recently registered its fifth Asia-Pacific flagship fund, just four years after closing another at $15 billion. More fundraising should sustain the momentum. Figures from Bain & Company show Japanese private equity exits rose to 1.9 trillion yen ($12.9 billion) in 2024, matching a record high from 2021, as the value of newly announced deals surpassed 3 trillion yen for the fourth year running.

The consultancy estimates returns on U.S. dollar deals in Japan of 2.4 times invested capital even pipped the 2.3 multiple on deals in the United States during the 2010-2024 period. Yet the value of annual deals since 2020 has averaged just 0.5% of Japanese GDP. That’s less than half the level in the U.S. and suggests serious untapped potential.

Thomson ReutersJapanese private equity deals offer world-beating returns

But there are limits on how quickly private equity funds in Japan can mint more big-ticket buyouts. For instance, most take-privates are still driven by external factors — like activist investor pressure — rather than Japanese boardrooms acting of their own volition. One portfolio manager in Tokyo reckons this reactive mindset won’t change until the current wave of delistings returns to the public market leaner, meaner and at higher valuations, which could take another two to three years.

If that scenario comes good, it will test another looming bottleneck for greater deal throughput: personnel. Between the abovementioned firms plus Carlyle CG and Bain Capital, demand for skilled wheeler-dealers far outstrips available talent, which can in turn limit capacity. Intense competition could also result in more time-consuming tussles like last year’s bidding war for Fuji Soft between KKR and Bain. Buyout giants will argue there are plenty of deals to go around in Japan, but that is true only so long as they act like it.

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CONTEXT NEWS

Blackstone on August 6 announced a tender offer to take engineering staffing firm TechnoPro private for $3.5 billion, marking the investment group’s largest-ever deal in Japan.

Separately, elevator and escalator maker Fujitec on July 29 agreed to sell itself for $2.7 billion to EQT, in the Swedish buyout firm’s biggest Japanese deal to date.