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ORIX plans debut private equity fund – exclusive

The US investment arm of ORIX Corporation, which currently operates on a deal-by-deal basis, seeks to launch its first vehicle in the next year and will invest up to $500m per transaction.

ORIX Capital Partners, a New York -based private equity firm backed by Japanese financial services conglomerate ORIX Corporation, is looking to raise its debut private equity vehicle as soon as 2018, Private Equity International has learned.

“In the next year or two we are looking to raise capital from third-party investors alongside ORIX Corporation as an anchor investor,” Terry Suzuki, president and chief executive of ORIX Capital Partners, said. “With a significant capital commitment from ORIX and its brand name, we believe that we can attract a good number of investors from US and overseas institutional investors and family offices.”

“While we have gradually developed our presence and reputation in the private equity market, ORIX is still rather new to the US investor community as a private equity investor so we’d like to demonstrate our performance first,” Suzuki pointed out.

The firm has not yet set a specific target but PEI understands ORIX has $1 billion currently earmarked for its private equity investments in the US in the next three to five years.

Capital raised from the fund will be invested in business services, infrastructure-related services, industrial and other B2B companies. Typical transactions will be between $150 million to $500 million.

The firm, which currently operates on a deal-by-deal basis, is aiming to close around three more transactions before launching the fund. Its current investments include water services company Hoffman Southwest Corporation, which it acquired from Chicago-based private equity firm Sterling Partners, real estate investment company Boston Financial and traffic control services company Roadsafe Traffic Systems.

Asked why the firm is focused solely on US private equity, Suzuki explained: “The US is one of the few developed countries in the world which is still growing in terms of population and economy. We like that it is transparent in terms of accounting, regulation and its legal framework, therefore ORIX feels the US is a place where we can expand the business in the next five to 10 years.”

However, he warned of heightened competition and a great deal of capital in the US-mid market today.

“Everybody is looking for a more than 10x EBITDA multiple transaction. Oftentimes, rather than creating value in their portfolio companies, a lot of firms try to flip the company by taking advantage of the current capital market situation,” Suzuki noted. “Now is a good time to sell companies but buyers need to carefully identify the targets’ future growth and be sure of the feasibility through robust risk management. “