Carlyle to close largest Japan fund

The Carlyle Group is preparing to close a new private equity fund that will focus on buyout investments in Japan, according to market sources. Capped at $2 billion, it will be the largest ever LBO vehicle dedicated to the world’s second largest economy.

A spokesperson for Carlyle in Hong Kong declined to comment.

Having raised the capital, Carlyle looks set to play a significant role in Japan’s fledgling but burgeoning market for large LBOs.

Earlier this month, the private equity arm of Japanese financial services group Nomura Holdings and buyout firm CVC Asia Pacific announced the $2.4 billion buyout of Skylark, the largest listed restaurant operator in Japan. It was the largest Japanese LBO to date and widely interpreted by market observers as confirmation that large deals are becoming increasingly feasible as the country’s long dormant economy gathers steem.

As a result, Japan is currently one of the most popular destinations for institutional capital in search of attractive investments in private equity.

Among the fund managers to recently benefit from this trend is Longreach, a Tokyo and Hong Kong private equity start-up. In April, Longreach closed on $750 million in commitments for its debut Japanese buyout fund. The firm is one of several increasingly high-profile locally based private equity groups and invests in the country alongside Tokyo rivals Unison Capital, MKS Partners and Advantage Partners. 

Japan has also become a magnet for international private equity firms. Kohlberg Kravis Roberts, Permira and most recently Texas Pacific Group are among the large global houses that have declared Japan a priority in their increasingly international hunt for deals.

Carlyle has been active in Japan for some time. In July 2004, the firm closed its first Japanese private equity fund on ¥50 billion, with the majority of the capital coming from local investors. A growth capital investment team and a real estate investment group were also established in 2004.

The new $2 billion buyout fund is adding to Carlyle’s increasingly sizeable Asian fund portfolio. Earlier this month the firm closed a $668 million pan-Asian growth capital fund, the firm’s third. 

The group, whose Asian franchise is managed by Wayne Wen-Tsui Tsou, has offices in Beijing, Hong Kong, Mumbai, Shanghai, Seoul and Tokyo. It also manages Carlyle Asia Venture Partners I, a $159 million fund, and Carlyle Asia Venture Partners II, a $164 million fund. Carlyle says it currently has the largest team of investment professionals in Asia Pacific among global private equity firms.