Investcorp opens Tokyo office to target Japan deals

Investcorp, the Bahrain-based alternative investment manager that once owned Tiffany and controlled Gucci, is opening an office in Tokyo to raise funds and pursue acquisitions of high-end Japanese manufacturers and other hidden gems.

The move represents the debut of major, private Middle Eastern funds in Japan and comes as private equity groups from around the world are increasingly concentrating their attention on the opportunities created by a national succession crisis, where companies have no replacements for elderly founders.

According to people close to the fund, which was founded in the 1980s and manages $42.7bn of assets, Investcorp is opening its office in Tokyo on Monday with around five staff and expects to double that number over the coming year as activities expand.

As an additional catalyst to accelerate its entry to Japan, Investcorp will appoint the former financial services minister, Heizo Takenaka, as the chair of its Japan operations. Takenaka rose to prominence in the 2000s when he spearheaded the highly controversial privatisation of Japan Post, a political project of former prime minister Junichiro Koizumi.

Investcorp, which manages alternative investment products for private and institutional clients, is a relative latecomer in Japan, following other private equity groups such as Blackstone and Carlyle in raising funds from wealthy individuals. Bain Capital and KKR have established a presence in Japan over decades and been involved in a series of multibillion-dollar buyout deals.

At a conference in Hong Kong last November, the chief executive of Carlyle, William Conway, told the audience: “Everything is on sale in Japan for people who have dollars, and I think that is something to take advantage of.”

The succession issue is a particular source of potential dealmaking, said people close to Investcorp. Tens of thousands of Japanese companies, many of which represent highly specialised manufacturers and artisans, are owned by elderly founders who have no successor to take over the business.

Almost 60 per cent of 170,000 Japanese companies surveyed by Tokyo Shoko Research last year said they had no successor. That dynamic has produced a thriving market for small-scale mergers but also opened the way for foreign acquisitions of companies that would never previously have entertained the idea of entering talks with a foreign buyer.

Luxury goods conglomerates, particularly in areas such as eyewear and high-end textiles, have spent recent years combing the Japanese industrial hinterlands for buyout opportunities — a treasure hunt that Investcorp, according to people close to the fund, now intends to join.