CLSA Capital Partners invests in Japanese educator

The firm’s investment comes from $210 million buyout vehicle Sunrise Capital II.

Hong Kong-based CLSA Capital Partners, the alternative asset management arm of brokerage and investment group CLSA has made its first investment in Japan’s education sector as it sees the country’s private tutoring businesses thriving.

The firm has invested an undisclosed amount in KK BC Holdings, the parent company of leading private tutoring operator BC Ings, CLSA Capital Partners said in a statement.

The investment came from Sunrise Capital II, a $210 million buyout vehicle targeting Japanese mid-cap companies with strong growth potential. Other investments from Fund II include food and beverage manufacturer Asamiya, auto maintenance tool retailer WorldTool, business process outsourcing company BayCurrent and car auction site Mirive.

CLSA Capital Partners said the company’s founder Hiroki Tanaka will continue to hold minority equity stake in BC Ings and will remain its representative director. Its current management team, brand name and operational policies will also be retained.

Keisuke Shitomi, a senior associate at CLSA Capital Partners Japan told Private Equity International that the private tutoring sector was initially too conservative to work with financial sponsors. He noted, however, that demand for financial sponsors has been increasing and founder-chief executives are viewing private equity as a major exit option when divesting their business.

“We believe this is attributable to the strong track record and reputation of private equity funds that have completed founder/owner succession type of deals. Also, many founders have come to recognise private equity funds as business partners that can assist in the growth of the business and professionalisation of management, rather than just buyers of companies in distressed situations,” he said.

BC Ings operates 68 “cram” schools for elementary, junior high and high school students under the brand Tanaka Gakushukai.

“BC Ings has provided high quality educational services in Hiroshima prefecture and Okayama prefecture over the years,” Megumi Kiyozuka, head of Sunrise – Japan said. “As education has become increasingly important in Japan, we believe BC Ings is well-positioned to capture robust growth in the future and we are honoured to take part in this capital alliance opportunity.”

Tokyo-based Yano Research Institute found that the market size for Japan’s cram schools grew to as much as ¥942 billion ($8.7 billion; €7.7 billion) in fiscal year 2015, while the e-learning market rose by 16 percent or ¥174.5 billion, backed by an environment of growing infocomm and technology utilisation in schools.

CLSA Capital Partners has about $3 billion of assets across private equity, real estate and industrial funds. It has offices in Singapore, Hong Kong and Tokyo.