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Take-private deals in Japan could top $40 billion in 2025

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Private equity interest in Japan bucks global slowdown in

buyouts

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Activist investors, Tokyo Stock Exchange reforms spur

deals

By Anton Bridge and Miho Uranaka

TOKYO, Aug 27 (Reuters) - Take-private deals in Japan

are likely to hit a record high this year, exceeding the $40.3

billion total racked up in 2023, according to private equity

funds and advisers, as companies bow to pressure to improve

returns for investors.

Japanese companies once feared private equity as "hagetaka",

or vultures. Now they are increasingly open to buyouts and

giving up their once-prized listed status in the face of calls

from activist investors and the Tokyo Stock Exchange to overhaul

capital management and cross-shareholdings.

Private equity players say there is unprecedented interest

from their backers in opportunities in Japan, with the spate of

deals this year bucking a global slowdown in such activity.

In the year to August 20, private equity deals totalled

$27.6 billion, almost triple the $9.5 billion over the same

period in 2024, Dealogic data shows.

Prominent deals announced in the past month include

Blackstone's $3.5 billion offer for engineering staffing

firm TechnoPro ( TXHPF ) and EQT's $2.7 billion bid for

elevator-maker Fujitec ( FJTCF ).

"We have an extremely rich pipeline of deals," said Kazuhiro

Yamada, managing director at Carlyle Japan.

"Of the more than 300 opportunities Carlyle Japan is seeing

across its three core sectors, around 30 have a chance of

closing in the next 12 to 18 months," Yamada said.

The Tokyo Stock Exchange has set out stricter governance

criteria, intended to make listed firms more attractive for

investment, which is forcing companies to explore options

including delisting.

The bourse's reform push, a response to Japan's unusally

high number of undervalued stocks, has sparked a slew of share

buybacks, asset sales and management buyouts.

PRIVATE EQUITY VS ACTIVIST INVESTORS

Growing activist activity, which is seen as potentially

preceding a go-private deal, is encouraging speculation on the

stock price of targeted companies.

"Particularly after activists come in, speculators can push

the share price up so high that nobody could make an offer,"

said Akihiko Manaka, co-head of investment banking and head of

M&A in Japan at Bank of America ( BAC ).

The share price of Fujitec ( FJTCF ) more than doubled in the three

years between activist Oasis first targeting the company and

EQT's bid in July.

The private equity firm's offer was a discount to the market

price.

"By the time a company reaches the point of needing to

privatise, it may be already too late to begin considering

potential partners," said Kohei Fukushima, a director at EQT who

worked on the Fujitec ( FJTCF ) deal.

To avoid that situation, companies are increasingly talking

to private equity firms before management becomes the target of

investors agitating for change, industry players say.

"In some sense it has become a natural strategic option,"

said Eiji Yatagawa, a partner at KKR in Japan.

"Some management are taking proactive action and considering

privatisation even before activists become shareholders,"

Yatagawa said.

Funds say that now up to around half of their discussions

with companies are initiated by the companies themselves.

Going private provides an opportunity for existing

management to undertake restructuring away from the eye of the

public market.

"At the C-suite level, the general practice among PE funds

is to at least give existing management a shot," said Jeremy

White, partner and global co-head of M&A at law firm Morrison

Foerster in Tokyo.

Funds say Japan's robust capital market supports later

relistings and companies pursuing mergers and acquisitions and

other funds also offer potential exit opportunities.

"We expect to see more sponsor-to-sponsor exits," said

Teruyuki Asaoka, managing director of EQT's private equity team

in Japan.

"There's a lot of capital to deploy in the industry and as a

result, private equity firms' positioning as potential buyers is

strengthening," he said.