Bain Capital, the Massachusetts, US-headquartered private equity firm, intends to pursue a broader range of investment opportunities in Japan this year, Naofumi Nishi, Partner, Bain Capital told Mergermarket.

Bain Capital holds a robust outlook on Japan’s M&A market in 2024 and expects the private equity deal volume will continue to increase in Japan this year despite the macroeconomic uncertainty, Nishi noted during an exclusive interview with this news service.

Japanese companies have now become more open to working with private equity firms as ‘a solution’ to buy assets from, sell non-core businesses to, or achieve privatizations/management buyout (MBO), he pointed out.

Under such circumstances, Bain Capital is looking to explore investment opportunities that will stem from founder-backed companies’ succession issues, carve-out/non-core divestitures, and shareholder activism situations. It will not be limited to any sector, he noted.

The firm has a sufficient number of professionals—approximately 60, which is double, or even triple compared with its peers — to cover every sector. It recently hired staff with expertise in real estate and special situations, expanding its capabilities to get involved in deals other than the usual private equity investments, he added.

The firm is also looking to drill down regional targets in the Kansai area, the second largest economic region in the country, through its Osaka office that was opened in February 2023, adding to its main Tokyo office, Nishi noted. Bain is the first global private equity firm that has an office in Osaka, according to him.

The mission of the Osaka office is to field needs for Bain’s private equity solution among companies in the Kansai area, as well as to manage its portfolio companies, Nishi said.

“After we opened the office in Osaka, we have received a number of inquiries from Kansai-based companies. Our Tokyo-based senior members occasionally travel to Osaka to discuss with them,” said Nishi, who is also among those who have visited Osaka frequently after the opening of the office, he added.

Nishi anticipates that the number of privatization/MBO deals would increase going forward, as more companies are considering such an option compared to a decade ago after they found that they’ve lost the meaning of being listed.

It is also looking for opportunities to be ‘a white knight’ for Japanese companies that are eyed by activist shareholders, like the way Bain did for T&K Toka in 2023, Nishi said. The idea of having a private equity firm as a white knight has started to be recognized by Japanese companies as a solution to get over such situations, he pointed out.

The exit environment for private equity firms will also remain relatively steady, as the window of the IPO market is still open in Japan, Nishi said.

It is also seeing growing interest in private equity firms’ assets from Japanese companies that are looking to achieve growth by buying such assets, Nishi said.

Bain Capital’s global headquarters in Boston also has high expectations of Japan because of its active M&A market and the Japan team’s various initiatives, Nishi said.

At the moment, the Japan team has successfully created a virtuous cycle in the country and has been enjoying it, according to Nishi.

“We have deployed enough number of human resources and have engaged in the Japanese market continuously over the years. Our solid track record helped us gain credibility and that makes us able to get approval from our global headquarters for difficult deals. It also helps the firm to secure LBO financing from banks on favorable terms,” he noted.

We are aiming to give value back to Japanese companies by offering our solutions”, Nishi added.

On the announcement basis, Bain Capital carried out six entry deals in 2023, consisting of investments into Impact HD, IDAJ, System Information, T&K Toka, and the transfer of Works Human Intelligence from Bain Capital Asia Fund III and IV to Bain Capital Asia Fund V and GIC, and Outsourcing, according to Nishi.

The firm conducted four exit deals, including Nichii Holdings, a Tokyo-based nursing care operator, sold to Nippon Life Insurance for JPY 210bn (USD 1.4bn), a partial stake (33.4%) sale of Kirindo (sold to Sundrug), Japan Wind Development (sold to Infroneer), and the transfer of WHI, according to him. 

Bain Capital’s portfolio companies

(Mergermarket)

(E) Estimated: When official and privately disclosed deal value or acquired stake % is unavailable, calculated based on assumptions and data from unofficial sources.

(M) Modeled: Estimated range based on different inputs including capital structure, M&A activities, intelligence, and others.

*Mergermarket’s LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.