Japan PE deal outlook brightens; healthcare services investments bounce back

S&P Global Market Intelligence offers our top picks of global private equity news stories and more published throughout the week.

A relatively quiet first half of the year for private equity-backed dealmaking in Japan has not dimmed the enthusiasm of investors who see a turning point for the country's private equity market.

Reduced corporate valuations, cheap financing linked to Japan's low interest rates and abundant investment opportunities in family-owned businesses and consolidating industries are creating a "massive" opportunity for private equity in Japan, KKR & Co. Inc. co-CEO Joseph Bae said in May. Japan has been KKR's best-performing market for private equity buyout deals since 2010, Bae added.

As global private equity firms make inroads, Japan's business community is increasingly opening to private equity investment.

Kenta Shima, partner at Toyko-based lower-middle-market firm J-STAR Co. Ltd., said the challenges posed by the COVID-19 pandemic prompted many business owners to reconsider the potential benefits of partnering with private equity — a significant turnaround from about two decades ago, when many Japanese business owners harbored "negative impressions" of private equity, Shima added.

That enthusiasm has not exactly translated into deals this year, however. The announced value of private equity-backed transactions in Japan through June 4 came to just $2.32 billion, on track to fall well short of the $9.92 billion full-year total recorded in 2023.

Read more about the tailwinds gathering behind private equity-backed dealmaking in Japan.

CHART OF THE WEEK: Healthcare services investments rebound in H1 2024

⮞ Private equity and venture capital-backed investments in the healthcare services industry totaled $6.67 billion in announced value this year through June 2, an amount equivalent to nearly 92% of last year's full-year total, according to S&P Global Market Intelligence data.

⮞ That puts private equity investment in healthcare services on track to rebound in 2024 after falling 59% year over year in 2023.

⮞ Just one deal accounts for most of the private equity-backed investment value so far this year: New Mountain Capital LLC's proposed $5.6 billion acquisition of patient data collection and payments platform R1 RCM Inc.

TOP DEALS AND FUNDRAISING

– Advent International LP and a subsidiary of Abu Dhabi Investment Authority agreed to invest between $2.5 billion and $3 billion in investment adviser Fisher Investments Inc. The minority investment is expected to close later in 2024.

– Fengate Capital Management Ltd. led a C$1.8 billion investment in Canadian data center company eStruxture Data Centers Inc. Partners Group Holding AG and Pantheon Ventures (UK) LLP also participated in the investment.

– A consortium led by KKR & Co. Inc. agreed to invest S$1.75 billion in Singaporean data center company STT GDC Pte. Ltd.

– Searchlight Capital Partners LP and Ares Management Corp. are jointly leading a consortium that will make a £500 million preferred equity investment in UK-based environmental consulting and engineering solutions company RSK Group Ltd.

– Kinderhook Industries LLC raised $2.75 billion for Kinderhook Capital Fund 8 LP at final close. The fund was oversubscribed, exceeding its $2 billion target.

– Charlesbank Capital Partners LLC secured about $1.28 billion in commitments at the close of its Charlesbank Technology Opportunities Fund II LP. The fund invests in lower-middle-market, technology-focused companies.

– Columna Capital LLP held a final close for Columna Capital Fund III SCSp, raising €290 million. The vehicle is the UK-based private equity firm's third and biggest fund.

MIDDLE-MARKET HIGHLIGHTS

– Gemspring Capital LLC exited its minority investment in power distribution company Sparkstone Electric Group.

– Audax Management Co. LLC divested its portfolio company, I Inc., doing business as Elm Home & Building Solutions. The buyer was Great Day Improvements LLC.

– Guardian Capital Partners Investment Management LP closed the sale Direct Line Global LLC, a technology infrastructure services provider, to CBRE Group Inc.

FOCUS ON: APPLICATION SOFTWARE

– São Paulo-based fintech company Integrated Solutions To Business SA, also known as Celcoin, received a $125 million investment led by Summit Partners LP.

– Zencity Technologies Ltd., an Israel-based community engagement platform, raised $40 million in a series C funding round led by StepStone Group LP, which was joined by TLV Partners LLC.

– Finaloop Inc., a bookkeeping and tax return services provider, secured $35 million in a series A round. Lightspeed Ventures LLC led the round and was joined by new investors Vesey Ventures LP and Commerce Ventures Management LLC.

______________________________________________

For further private equity deals, read our latest In Play report, which looks at potential private equity-backed M&A, including rumored transactions, each week.

For private credit news, see our latest private credit newsletter issued twice per month.