KKR optimistic about Japan(2)

Kohlberg Kravis Roberts co-founders Henry Kravis and George Roberts have argued that Japan is set to change its attitude to private equity over time, as investors demand better returns.

Henry Kravis and George Roberts, two of the founders of Kohlberg Kravis Roberts, have argued that private equity has a big future in Japan, despite the industry’s failure to establish a sizeable presence in the country so far.

During their current trip to Japan, the two men told a press conference on Tuesday that the previously hostile reception to private equity firms in the country would have to change, amid growing demand from investors for better returns.

Kravis and Roberts are in Japan on a charm offensive, as they attempt to sell the benefits of the asset class to a traditionally sceptical audience.

According to the FT, Kravis said Japan is in a similar position to the US in the 1970s and 1980s, when companies were under pressure from activist funds and institutional investors. In the US Kravis claims this meant “managements woke up and really started operating more efficiently.”

“I see a lot of the same thing here in Japan; that eventually this will happen. It will take time. It’s not going to happen overnight. But we believe that it will and we sure plan to be here for the long term as patient investors,” Kravis reportedly added.

Buyout firms have long struggled to establish themselves in Japan, with the country accounting for just 1 percent of global buyout activity. There has been an ongoing resistance in Japan to the idea of selling assets on the cheap to foreign investors, who can then make huge profits when the market recovers.

Ripplewood and Cerberus are just two investment groups who have made hugely successful investments in the country.

KKR made its first foray into Japan last month by taking a ¥20 billion ($170 million, €124 million) stake in Orient, a credit card firm being bailed out by a consortium of investors led by Mizuho Financial Group.

The buyout giant is also currently raising its first Asia buyout fund for investment in Japan, China, Hong Kong, Taiwan, Australia and New Zealand, with a target of $4 billion (€2.9 billion).