DRC nears close of $150m Japan fund

Tokyo-based DRC Capital wants to exploit overlooked opportunities in turnarounds of mid-sized Japanese companies with its latest fund.

DRC Capital expects to close its latest Japan-focused private equity fund at the end of the first quarter of 2011. The Tokyo-based firm has already raised half of its $150 million target for the US dollar-denominated JLP DRC II fund, which will target investment opportunities in mid-sized companies in need of capital for growth and restructuring.

Japan has not been a prime destination for private equity commitments by limited partners in recent years. But DRC’s management team has turned this dearth of deal flow into an opportunity to help medium-sized Japanese companies restructure.

And restructuring Japanese companies often entails tackling operational bloat. “Japan was always a place where companies were expected to provide life-time employment. That has produced some harsh balance sheet realities, bottlenecks to growth for smaller companies in the downturn,” a source familiar with the DRC strategy told PEO. “The (DRC) strategy is to help companies eliminate these corporate bottlenecks. This isn’t just financial engineering. DRC takes a hands-on role in working with management to reduce operational expenses.”

DRC didn’t return a call for comment. It's not clear how much DRC raised for its debut fund.

DRC’s CEO is Hideo Aomatsu, a former president of Rothschild Japan. Other senior team members include Naoto Mizoguchi, Hiroshi Sakai and Toshida Kawashima. The firm was founded in 2005 by Aomatsu and his former team from ACTIV Investment Partners.

Recent portfolio investments by DRC have included stakes in sporting-goods and bicycle-seller Kojitu and the startup HUBees. DRC has also invested in a management buyout of Universal Home and offered capital for restructuring of specialty insurer Rent-Go Guarantee.