Iwakaze Capital, a mid-market focused buyout firm in Japan, is halting fundraising for its second investment vehicle that had been targeting $200 million (¥16 billion).
Iwakaze appears to have had trouble attracting sufficient commitments to the fund. “It is a very tough environment to raise the new fund,” Iwakaze chief executive officer Kenji Ueda said in an email. “So, we are waiting [for] the next wave for the fundraising.”
Instead, Iwakaze, which was formed in 2008, will work to manage out investments in its debut fund, which raised $23 million, Ueda said. The fund “is getting better performance, so we expect … good exit[s] in a couple of years”, he said.
The firm had launched its second fund in 2010 and was marketing heavily among western limited partners to try and expand the potential capital base. One source close to the firm told Private Equity International at the time Iwakaze would have trouble hitting its target by focusing solely on Japanese LPs. The firm, which was working with placement agent Young American Capital, had hoped to close fundraising on the vehicle by last September.
It is a very tough environment to raise the new fund. So, we are waiting [for] the next wave for the fundraising.
Ueda was a representative director and managing director of RHJ International Japan and Ripplewood Japan for more than eight years. Iwakaze’s first investment was in Gonzo, a Japanese animation company. The firm invested $15 million for an 80.6 percent stake in the company. The firm also invested $2.24 million in AEMSS, an automotive die engineering/manufacturing company, for a 70 percent stake.
Japan has not been the most desired destination for Asia-focused GPs as the country’s economy has remained stagnant since the Asia financial crisis decimated the market in the 1990s and left the country in a long recession.
However, the country’s had 45 private equity exits in 2011, the third highest figure since 2006 when 48 companies exited, according to Brightrust PE Japan. From 2000 to 2012, 624 fund-sponsored buyouts in Japan have been completed, of which 345 have been exited, a figure which includes write-offs, according to Brightrust.
Also, Bain Capital last year announced the largest buyout in Japan in at least two years, buying restaurant chain Skylark for $2.1 billion. Bain has been active in the country for years, opening a Tokyo office in 2006.
Japanese LPs – generally including pensions and financial institutions – have been reducing their allocations to domestic GPs, according to Japanese placement agent Ark Alternative Advisors in a prior interview.
“We have an excessive amount of GPs in the market at the moment, so we’ll probably see in the next couple of years some consolidation. The next two to three years are going to be very critical here. The ones who would survive may not necessarily be the US or European-style buyouts, but those who really understand the Japanese business culture and can implement that into their investment strategy,” the firm said.