Carlyle Japan Chief Operating Officer Predicts Increase in Private Equity Transactions As New Post-Covid Business Environment and Growing Pressure on Companies to Achieve Carbon Neutrality Drives Wave of Acquisitions and Spin-offs .
Kazuhiro Yamada told the Financial Times in an interview that the pandemic is accelerating asset sales and purchases of new technology among Japanese companies that could have taken years before to make such decisions.
“Consumer behavior and [the] the business model has changed dramatically in the aftermath of Covid-19, so companies that have been affected have no choice but to carry out structural reforms, ”Yamada said, adding that the availability of cheap finance with Japanese mega-banks made the environment particularly attractive for private equity.
A post-pandemic boost would build on the enthusiasm that has drawn the world’s largest private equity firms to Japan. Several groups, including KKR, believe the country is the richest market for opportunities outside of the United States.
The average size of PE deals in Japan has grown, but Carlyle has focused on smaller ones, often involving companies she has been in negotiations with for several years. Since 2000, Carlyle, which has been in the country for more than two decades, has invested more than $ 3.2 billion in 27 Japanese companies.
Bain & Co, the advisory group, calculated that private equity firms collectively held record unspent capital of $ 477 billion focused on the Asia-Pacific region at the end of 2020.
Private equity transaction activity slowed in the first half of last year, but Yamada said the pace will pick up in 2021. “The number of transactions we are seeing is significantly higher than in 2019 and in the second half of the year. 2020 “, he added.
According to Dealogic, there have been 25 private investments and other similar types of investments in Japanese companies worth $ 8.6 billion this year, compared to deals worth $ 9.5 billion on the whole of 2020 and $ 10.3 billion in 2019.
Large companies such as Hitachi and Panasonic will continue to face pressure from shareholders to sell non-core assets, Yamada said. But he added that about half of Carlyle’s deal pipeline would stem from succession issues, as a glut of corporate retirements has prompted many to consider previously unlikely options, including equity sales. -investment.
Pressure from governments globally for companies to reduce their carbon emissions should also force companies to buy new technology and withdraw from traditional areas that are not environmentally friendly. “It will clearly be an investment opportunity for us,” said Yamada.
Carlyle abandoned its investment in WingArc1st in March after the software company launched an initial public offering on the Tokyo Stock Exchange. This marked his 18th exit from a Japanese company, eight of which went public.
Public listings remain the preferred option for many CEOs Carlyle has dealt with in Japan and are important to corporate reputations, Yamada said.
“It is very important that future marketing is known as a fund for IPOs,” he said, even though the exit via an IPO is longer and riskier than selling to a competitor for private equity groups.
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