U.S. private equity and venture capital deal activity in Japan spiked in 2022 despite a declining trend in the rest of Asia-Pacific.
Deal value totaled $13.31 billion across 10 announced and completed transactions in 2022 compared to $8.12 billion across 11 transactions in 2021, according to data from S&P Global Market Intelligence.
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Deal volume in the fourth quarter of 2022 was the highest in the last two years, but deal value declined for two straight quarters after recording $6.12 billion in the second quarter.
The aggregate transaction value declined 41.6% year over year to $2.05 billion in the last three months of 2022.
US interest in Japanese deals
The 2022 increase of U.S. private equity investments in Japan is linked to the ample dry powder, or uninvested capital on hand, of many funds launched within the past three years, Tsuneo Watanabe, an executive officer of Nihon M&A Center Holdings Inc., told Market Intelligence.
Myojo Asset Management Japan Co. Ltd. CEO Makoto Kikuchi added that economic conditions in the U.S. could be a factor in further Japan investment.
"U.S. private equity will likely continue to seek targets in Japan as the U.S. market could remain risky for investment this year, given rising interest rates," Kikuchi said.
However, Japan has limited attractive targets due to the relatively smaller size of its market, he added.
Biggest deals
The $6.04 billion buyout of Hitachi Transport System Ltd. by KKR & Co. Inc.'s KKR Asian Fund IV was the biggest transaction with U.S. private equity involvement in Japan in the last two years.
Only four deals in 2022 had a transaction value of more than $1 billion, including Bain Capital Pvt. Equity LP's $3.12 billion acquisition of Evident Corp. from precision machinery manufacturer Olympus Corp. and the firm's $1.42 billion purchase of a majority stake in MASH Holdings Co. Ltd.
KKR acquired Mitsubishi Corp.- UBS Realty Inc. from Mitsubishi Corp. and UBS Group AG for $1.94 billion.
