Understanding Japan PE Investment and How to Reach Targeted Equity Growth

The private equity market in Japan has shown positive trends over the years. There is about $12 billion in deal value per year in the region. Compared to the size of the U.S’s PE market, Japan’s PE market size is smaller. However, it is possible that Japan’s private equity growth will soar much higher than before.

When compared to other developed countries, Japan’s PE market size is indeed relatively smaller. Meanwhile, when compared to other Asian countries, this market is more attractive, especially if investors focus their view on larger buy-outs, which amounts are more than $250 million.

Understanding Private Equity Industry in Japan

Global PE investors who plan to enter the PE industry in Japan must have a better understanding of this industry. Some of the key points about this industry are:

  1. The Comparison of Japan PE Market and PE Market in Asia Pacific


The PE market in Japan lies more on buy-outs, which accounts for 85% of the total deals. Meanwhile, the total buy-out deals in Asia Pacific are approximately 30% of the total deals.


Moreover, Japan has larger shares of bigger deals. Deals whose values are more than $1 billion account for about 65% of the total deals. On the other hand, deals over $1 billion in Asia Pacific only account for 35%.


Japan is the 2nd largest market in APAC when it comes to larger buy-outs over $250 million. In addition, the PE market in this country is more attractive due to the lower public valuations and a large opportunity for the companies to grow.


  1. Holding Period and Exit


PE firms exit their investment when the portfolio companies reach the equity growth they aimed. The Japanese PE firms approximately have a holding period of 4.7 years on average. It is rare for them to have a holding period shorter than 2 years and longer than 10 years.


These firms exit their investment in various ways. Most of them sell the portfolio companies to investors. Others sell these companies through an IPO.


  1. Key Deal Trends


There are three key deal trends in Japan, i.e. corporate carve-outs, founder successions, and growth equity. The last deal is generally made into start-up companies in their late stage. The amount of this PE investment is generally smaller and more affordable for beginner investors.

How to Boost Private Equity Growth

Investors make a PE investment in order to gain profits and reach their targeted growth. Once their portfolio companies are profitable or show excellent growth, they will sell the companies. It may sound simple, but it is actually not.

To ensure the success of your investment, you need to hire a Japan private equity consulting firm. This firm has excellent expertise in providing consultation on PE investment. It also has broad knowledge on potential Japanese companies that offers big opportunity to grow into profitable companies.

The firm will help you to create a strategy to transform the portfolio companies into profitable companies. With the help of this consulting firm, PE investors do not need to perform complicated research to find the most promising companies to invest in. Therefore, you can focus your energy on more important tasks.

Transforming a troubled company into a profitable one is not easy. Therefore, it is essential for PE investors to hire a PE consultant so that they can get accurate data and suggestions on effective PE investment strategies.

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