Carlyle raises debut Japanese fund

The Carlyle Group has raised Y50bn ($470m) for its first Japanese buyout fund, with nearly 60 percent of the fund’s commitments coming from Japanese institutional investors.

US private equity house Carlyle has closed its first Japanese buyout fund, raising Y50 billion ($470 million; €370 million) following the launch of the firm’s Japanese operations in 2000.

Carlyle Japan Partners LP is targeting management buyouts of companies in the firm’s preferred sectors of manufacturing, consumer goods, corporate outsourcing services, telecom/IT services, and healthcare. The firm will typically invest between Y3 billion and Y10 billion per transaction.


The firm has already completed three buyouts in Japan, most recently acquiring Colin Corp, a medical device manufacturer based in Komaki, in November. In August 2003, the firm acquired 90 percent of Kito Corp, the leading manufacturer of hoists and cranes in Japan, for Y13 billion. In February 2002, the firm completed its debut deal, acquiring Asahi Security, a security service company whose businesses consist of cash management outsourcing services and electronic security services.


“We are pleased to have attained this important milestone,” said Tamotsu Adachi, Carlyle Managing Director and head of the Japan team, in a statement. “Reaching this level, coupled with the three buyout transactions we have completed, demonstrates that the Japanese business community understands the positive and important role that private equity can play.”


Carlyle is hoping to take advantage of corporate restructuring currently under way in Japan. The Japanese government is pressuring banks to resolve non-performing loan issues and has established the Industrial Rehabilitation Corporation (IRC) to facilitate corporate revitalisation. Corporations are also starting to put greater emphasis on profitability and efficiency, divesting non-core subsidiaries in the process, which is likely to increase the level of opportunity on offer to private equity firms.


Corporate restructuring is already having a noticeable effect on M&A activity in Japan. In 2003, according to data compiled by Dealogic, M&A was up 80 percent at $75 billion.


David Rubenstein, Carlyle co-founder and managing director, described Japan as having “vast potential in terms of private equity investing.” He added: “We have a superb team of Japanese investment professionals working to deploy this capital. Their knowledge of the Japanese market and ability to add value to the management of our portfolio companies adds significantly to Carlyle’s effectiveness on a global basis.”


The fund is Carlyle’s first dedicated Japan fund and one of the largest raised for the country. The firm also has an Asia fund, which raised $750m in 1999.


Carlyle established a Tokyo office in 2000 and has 15 investment professionals. The firm has also made several venture investments, including eAccess, one of the leading broadband access providers in Japan, which recently went public on the Tokyo Stock Exchange.


Carlyle didn't use a placement agent for the fundraising. The firm received legal advice from Anderson Mori in Japan and Simpson Thacher & Bartlett in the US.