Sweden-based private equity firm EQT has a near-record number of Japanese deals in the pipeline despite market turbulence, executives said, helped by the country’s relatively stable financing environment and a flow of corporate shake-ups.
EQT’s robust deal-making activity in Japan puts the world’s third-biggest economy in the private equity limelight at a time when higher borrowing costs have suppressed buyouts in the United States and Europe after a record 2021. It also underlines the increasing pace of asset spinoffs by Japan Inc’s big names.
“The deal flow right now has been as high as last year, when (private equity) markets hit record highs,” Tetsuro Onitsuka, Tokyo-based partner at EQT’s Asia private equity team, told Reuters in an interview.
EQT has just completed a $6.7 billion deal to buy Hong Kong-based Baring Private Equity Asia (BPEA), combining the two firms’ Asia private equity businesses for global expansion. The merged team, BPEA EQT, has 15 members in Japan.
BPEA has previously completed major deals in Japan including a buyout of tech firm Pioneer Corp. EQT, which only entered the Japanese market last year, will retain its separate partnership with Japan Industrial Partners, one of the bidders for a Toshiba Corp 6502.T buyout.
Takanobu Hara, also a Tokyo-based partner at BPEA EQT, said in the same interview that carve-outs from Japanese conglomerates and buyouts of founder-led companies continue to represent a large portion of their dealmaking.
Japan in recent years has seen a flurry of non-core asset sales by conglomerates such as Hitachi Ltd 6501.T and Panasonic Holdings Corp 6752.T, but Hara said more are coming.
“The first wave of carve-outs mainly focused on independently operating entities within a group, like listed subsidiaries,” Hara said. “Now we are seeing an increasing number of ‘real’ carve-outs, in a sense that conglomerates are carving out business divisions from within.”
Onitsuka added that Japan’s relatively solid financing situation, thanks to domestic banks’ healthy appetite for financing buyouts, has helped keep private equity deals flowing.
Onitsuka and Hara declined to comment on bidding for Toshiba.