Advantage Partners: More cross-border deals in 2017

Taisuke Sasanuma, founder of Japanese private equity firm Advantage Partners, sees growth in cross-border investments between Japan and Asian countries in the next year.

As 2016 draws to a close, Private Equity International caught up with Taisuke Sasanuma, founder of Tokyo-based private equity firm Advantage Partners, which is currently on the fundraising trail for its fifth Japanese buyout fund targeting $600 million. Sasanuma shares how the firm has performed in 2016, as well as his views on private equity opportunities in Japan for the coming year.

Q. How has 2016 been for Advantage?

A. 2016 has been a great year for Advantage Partners. We’ve continued to see a robust level of deal flow, resulting in our completing five new investments during 2016 (four closed, one signed), along with a potential sixth to be signed by the end of the year. Fund IV-S, a 2013-vintage vehicle which raised ¥20 billion ($200 million; €192 million) is now fully invested in 11 companies and as a portfolio is performing strongly. Meanwhile 2015-vintage Fund V is also shaping up to be a nice portfolio with four investments completed that are demonstrating growth across a variety of sectors; and we have a fifth deal near signing in Fund V. We’ve also signed our first investment in the Asia Fund to acquire a Malaysia based consumer products manufacturing and packaging company, and believe we are positioned well to leverage our Japanese experience to enable this company to achieve another level of growth.

We’ve also seen a healthy level of exit activity during 2016 with several of our portfolio companies in Fund IV and even Fund IV-S returning significant capital to investors through partial sales, buybacks and dividends. We expect this trend to continue in 2017, particularly from Fund IV, as demand remains strong in Japan and in the region among corporates to acquire high quality companies across a variety of sectors. We expect to be making announcements about several exits in the coming two to three months.

Q. What lies ahead in 2017? What are you most excited about?

A. We’re excited about 2017 for many reasons. We continue to see a very healthy level of deal flow coming from multiple sources including founder/owner succession deals and Japanese corporates being more active sellers, and in a variety of sectors including consumer products, business and consumer services, manufacturing, technology and e-commerce, etc. We believe the breadth and depth of deal flow is indicative of the private equity opportunity in Japan and believe this will continue to drive a steady pace of investment through 2017 and for years to come. And indeed our pipeline is evidence of this trend, with a number of founder/owner succession and corporate divestitures in the pipeline.

As mentioned earlier, we also believe 2017 will be a strong year for us for exiting and creating realisations for investors. We have a number of companies in our portfolio that are in sale processes and expect to have fully exited most of Fund IV by the middle of 2017. We are also targeting some early exit activity in Fund IV-S either via full sales or recaps, dividends and share buybacks, as lender support for this type of activity is also expanding in Japan. In short, we believe 2017 will be another strong year for new investments and exit activity, and we are looking forward to the new year.

Q. Where do you see opportunities for growth in Japan and also in Asia next year?

A. We believe significant growth opportunities exist both in Japan and throughout the region in a variety of sectors and industries. By definition, many of the companies we acquire are growth based as founder/owners often reach a point where growth in their companies is beyond their interest or ability to manage and they therefore seek outside professional external management and partnerships with private equity. We expect themes such as an ageing population, including outdoor products, healthcare and leisure; e-commerce; and manufacturing will continue to drive growth in the domestic market.

Separately we also see growth in cross-border related investments between Japan and countries in the region. Companies with products, services or technologies that can be expanded or transferred to large consumer populations or economies outside Japan in Asia are particularly interesting to us. Countries such as China and areas in South-East Asia such as Thailand and Malaysia offer attractive control investment opportunities in companies that may benefit from our Japanese networks and presence to introduce customers or create links between Japanese corporates and/or partners.

We are also optimistic that the steps the Abe Administration is taking to introduce growth beyond monetary and fiscal measures are real and will lead to continued sustainable domestic macroeconomic growth, which will act as a tailwind for private equity and the companies in which we invest.