US Carlyle raises $2.8b in its largest Japan-focused buyout fund

US private equity giant Carlyle Group is bulking up its Japan presence with a new record-breaking fund of 430 billion yen ($2.8 billion), Nikkei reported on Tuesday.

This latest Japan-focused fund, nearly 70 per cent larger than its 2020 predecessor, represents one of the largest private equity vehicles ever dedicated to the Japanese market.

Carlyle’s fifth Japan fund will target investments across three key sectors: technology, media & telecommunications; consumer, retail & healthcare; and manufacturing & related industries.

The firm’s previous Japan investments have typically been mid-sized deals, averaging around 50 billion yen in enterprise value. However, the new fund will set its sights on larger transactions, ranging from 100 billion yen to 200 billion yen.

The fund has a global perspective, with 70 per cent of its capital from international investors, including Asia (excluding Japan), the Middle East, and North America. Japanese sources contribute the remaining 30 per cent.

The Tokyo Stock Exchange is encouraging companies listed in Japan to optimise their capital allocation by divesting non-core assets, especially for companies with stock prices below book value.

Carlyle, a key player in Japanese private equity since 2000, has completed over 40 investments totalling around 450 billion yen.

Recent investments by Carlyle include Tsubaki Nakashima, a precision steel ball manufacturer, and Orion Breweries in Okinawa. Carlyle has also made a 130 billion yen offer for Tokyo-listed restaurant group KFC Holdings Japan.

The success of Carlyle’s 2020 Japan fund, which is currently 70 per cent committed and boasts a high internal rate of return of around 28 per cent, further underscores the potential for their new, larger fund.