Carlyle raises largest Japan buyout fund

Global private equity firm The Carlyle Group has closed its second Japanese buyout fund on $1.9 billion.

The Carlyle Group has raised ¥215.6 billion ($1.9 billion; €1.46 billion) for its second Japanese buyout fund. It is the largest private equity dedicated to Japan to date.

The long-anticipated closing comes on the heels of Carlyle’s pan-Asian growth fund, which closed on $668 million in June, and ahead of a final closing for a pan-Asia buyout fund, which is expected to raise over $1.5 billion.
Carlyle Japan Partners II is more than four times larger than its predecessor, which closed in 2001 on ¥50 billion. According to a Carlyle spokesperson, Carlyle Japan Partners I is almost fully invested after seven investments in sectors spanning healthcare, industrial, automobile, business outsourcing, media and communications.

Market sources say that the new fund is more than twice oversubscribed, even though Carlyle raised its original target substantially in response to strong demand. Japanese investors contributed approximately half of the fund’s commitments, Carlyle said in a statement. 

“The thing about Japan is there are so few funds that are open to non-Japanese investors, and Japan is where all the hype is for private equity investors in Asia,” said one investor in the fund.
Commenting on the prospects for private equity in the Japanese market, Tamaotsu Adachi, who runs the Japanese buyout team, said: “The environment surrounding Japanese corporations is drastically changing amid intense global competition, increasing pressures from investors, as well as ongoing legal and tax reforms. To outperform the competition, corporate executives are often required to make quick and bold decisions to restructure and transform businesses.”

As the country emerges from a long period of economic stagnation, it is becoming a hotspot for LBOs in Asia. In June, CVC Asia Pacific and the private equity arm of Japanese financial services group Nomura Holdings set the record for Japan’s largest ever MBO by acquiring Skylark, a restaurant operator, for $2.4 billion. Numerous transactions of similar size are expected in the coming months.