Japan’s T Capital gathers its first overseas commitments with latest fund

About one-third of T Capital VI was committed by 11 international LPs, managing partner Koji Sasaki tells Private Equity International.

T Capital Partners, a Japanese buyout firm, has raised overseas capital for the first time.

The Tokyo-headquartered firm held the final close on T Capital VI on its ¥81 billion ($771 million; €641 million) hard-cap this week, according to a statement. Fund VI launched in July and had a ¥70 billion target.

T Capital raised ¥26 billion from 11 international limited partners, ¥54 billion from 41 Japanese investors and made a ¥1.1 billion GP commitment, managing partner Koji Sasaki told Private Equity International.

Fund VI is T Capital’s first since completing a management buyout from Tokio Marine & Nichido Fire Insurance in 2019.

“Lots of global investors had visited our offices in Tokyo,” Sasaki said. “Everyone said: ‘Sorry, we cannot commit to a captive fund,’ so in order to globalise our investor base we wanted to become independent from the parent.”

The international capital is held across two Cayman Islands funds, both of which are co-investment vehicles. UBS served as placement agent on the fundraise.

“We had planned a roadshow in February and March to travel to North America, Europe and Asia, however, the coronavirus appeared and actually all plans were cancelled,” Sasaki added. “We haven’t met any overseas investors face-to-face during the formal fundraising process, we did everything through Zoom.”

Fund VI is about 57 percent larger than its predecessor, TMCAP2016, according to PEI data. That vehicle has completed six investments to date, including aerospace manufacturer Imai Aero-Equipment, confectionary business CONFEX and childcare consultancy WITH Holdings, per the firm’s website.

T Capital will increase the number of investments it targets in Fund VI and the size of its deals, Sasaki said. The firm has historically targeted companies with $10 million of EBITDA and is now able to consider those with up to $30 million of EBITDA.

“We’d look to put a more diversified portfolio in our fund,” Sasaki noted. “In the past, we were somewhat told that, for the fund size, it was not diversified. So, our current fund is six portfolio companies and the next fund we’d like to make eight to 10.”

Japan has drawn more international attention in recent years. European giant EQT launched a Tokyo office last week and has begun forming a private equity investment team. Apollo Global Management and Pantheon both launched offices in 2018. Carlyle Group – which has been in the country for around two decades – KKR and Blackstone, have also been staffing up their existing teams.

Interest has been driven in part by a proliferation of mega-deal opportunities stemming from enhanced scrutiny on corporate stewardship, which has prompted some local businesses to spin-off non-core segments tax-free.

Japanese fundraising is still dominated by domestic GPs. Of the $17.1 billion raised for Japan-focused private equity funds between 2016 and 2020, $12.9 billion was collected by firms headquartered in Japan, according to PEI data. Only 11 of the 77 funds closed during the period were managed by international GPs.