Despite the positive trajectory, the Japanese PE industry still has untapped potential. The industry needs to focus on four strategic priorities: deploying a thematic investment approach, sharpening the narrative for stakeholders, building a holistic value creation playbook customized for Japan, and pursuing investment opportunities in growth-stage companies. By aligning with emerging trends and executing effectively, the PE industry can drive productive change and create a winning proposition for stakeholders across the corporate ecosystem.
Key takeaways:
- The Japanese private equity (PE) industry is experiencing significant growth, with 2021 and 2022 being the biggest years ever in terms of deal activity. This growth is expected to continue into 2023.
- Despite this growth, the industry still faces challenges, including a historically lower level of M&A activity and a cultural context where businesses are often held by families or in tighter ownership structures.
- PE firms in Japan can create value by aligning with emerging trends, such as the desire among employees for upward mobility and engagement, and by helping companies increase digitalization, internationalization, and reinforcement of recurring-revenue business models.
- There is significant potential for PE investment in growth-stage companies in Japan, as the need for start-up financing is accelerating and has grown to a scale of more than JPY 900 billion ($634 billion) since 2022.