July 5, 2016
Interviewed by: Privcap
Video Clip
Login to view full video

Japan’s PE Market Sees Change in the Air

The CEO of placement agent MVision discusses the evolution of private equity in Japan, including a more open deal market and growing interest among Japanese institutional investors for the asset class.

The CEO of placement agent MVision discusses the evolution of private equity in Japan, including a more open deal market and growing interest among Japanese institutional investors for the asset class.

Japan’s PE Market Sees Change in the Air
With Mounir Guen of MVision

Can you give us an overview of private equity in Japan?

Mounir Guen, MVision:

The penetration of private equity in Japan is 0.8% of GDP. In the United States, it’s close to 15%. That’s a dramatic difference. And as a result of that, I don’t think private equity is as well known and isn’t as well appreciated in terms of its capabilities and its contribution. And so there is still a learning that needs to take place.

Why is Japan so underpenetrated by private equity?

Guen: There are a number of structural issues where working with subsidiaries or, in the United States, they have orphaned departments. It is resolved within the firm. And it’s only in times of difficulty that the deal flow was made available because other alternatives had to be sourced.

So the environment in and of itself, the difficulty was always access. It wasn’t lack of local strength and local private equity capabilities. It was access. But when you look at Japan of today, it is a country that’s very much changing in my view. I was there two weeks ago and, you know, I have to say I really feel the energy that it has. There is a lot more entrepreneurialism. There’s a lot more kind of open-mindedness. And that is starting to come into the system.

How big is the potential PE deal opportunity in Japan?

Guen: There’s about 3,400 listed companies in Japan. They have 40,000 departments that could potentially be candidates for private equity. Now, it’s not as if private equity doesn’t have good rhythm. They do about 40 to 50 deals per year, which is pretty good, but the ability to have that type of ownership positioning and create the value is more in the mid-market, as in the smaller.

Last year, and potentially this year, the Japanese M&A activity in Asia alone dominates number one by far and that’s important.

Can you talk about the evolving LP community in Japan?

Guen: Not only do you have that well-run portfolio from those that are active, but you have those that are to become active at the larger end and at the smaller end so that the number that are coming into alternatives, it is growing quite dramatically.

Change is in the air. They’re learning faster about other programs. They are bringing in advisors and consultants to review their programs.

And I think that, you know, today they’ve opened by necessity because they need returns and, having opened, they’ve uncovered a fantastic community that’s very receptive and is forward-moving and, you know, very informative to one another.

Register now to watch this video and access all content.

It's FREE!

  • CHOOSE YOUR NEWSLETTERS:
  • I agree to the Privcap terms of use and privacy policy
  • Already a subscriber? Sign In

  • This field is for validation purposes and should be left unchanged.