Japanese middle-market private equity firm NSSK is seeking JPY 200bn (USD 1.35bn) for its fourth flagship fund, according to two sources familiar with the situation.

One of the sources added that NSSK has embarked on the international leg of the fundraising effort before targeting local LPs, in contrast to most Japanese private equity firms. Thrive Alternatives is serving as placement agent.

NSSK’s third fund, which closed on JPY 100bn in 2023, was two-thirds larger than its second. Speaking to AVCJ in June 2024, Jun Tsusaka, the firm’s founding managing partner, presaged another step-up in size for Fund IV, noting the quality and volume of deal flow.

“We thought we could deploy JPY 100bn in three-and-a-half years, but based on our current trajectory, we’ll be done by the end of the year. Next time, it will probably be closer to JPY 200bn,” he said.

“There is an element of tail-chasing-dog; we will hit that moment when the music stops, and everyone has too much money. Every movie has that episode. But will it happen in the next 3-5 years? A lot of investors are saying probably not.”

Tsusaka, who formed NSSK in 2014 after leading a spin-out of TPG’s Japan team, declined to comment on fundraising when contacted at the end of last week. Thrive also declined to comment.

Japan private equity fundraising reached a record USD 13.9bn in 2024, with USD 8bn of that going to buyout strategies, according to AVCJ Research. This included final closes for the likes of Carlyle and Integral Corporation, both roughly doubling their totals from the prior vintage.

This year has been slower, with USD 5.1bn raised to date. However, NSSK is not the only manager in the market eyeing a significant step-up in size. Bain Capital is targeting approximately USD 2bn for its second Japan fund, having raised USD 1bn for Fund I.

Private equity deal volume in Japan is often skewed by one or two mega transactions in any given year. Looking at deal count alone – which is dominated by middle-market activity – an annual average of 144 buyouts was recorded in 2021-2024, compared to 85 in the four years prior.

NSSK can point to recent success with larger investments. The 2023 acquisition of Sakura Pharmacy Group, a drugstore chain undergoing a restructuring after a troubled M&A spree, was the firm’s biggest-ever deal. Having implemented an expansion plan, it exited via trade sale earlier this month.

Sakura was a special situations investment. NSSK also targets business succession, corporate carve-out, and take-private transactions. There are 38 active portfolio companies, according to its website. Three positions remain in Fund I, 22 in Fund II, and eight in Fund III. The rest are held by regional impact funds that focus on specific parts of Japan.

In June, the firm launched a tender offer for Tokyo-listed education services specialist With Us Corporation. This followed investments in nursing care provider KiiT and property management business Apaman Property.