Private equity firms invest in Japanese food

Global private equity firms are investing in Japan's thriving restaurant and food sector, as they wa…

Global private equity firms are investing in Japan's thriving restaurant and food sector, as they wait for the country's notoriously slow conglomerates to restructure and reverse a slump in major deals, reports Reuters.

While they may be small, deals like Carlyle Group's (CG.O) investment in bean sprouts producer GGC Group for an undisclosed amount in March are welcome news after the volume of global private equity buyouts in Japan fell by half in 2015 to well below $1 billion.

"Private equity firms have better chances for success in the food and restaurant sectors in Japan," said Kazushige Kobayashi, the Tokyo-based managing director at Capital Dynamics, a Swiss-based company that invests in PE funds.

"These industries are fragmented so competition is not fierce. Lots of smaller companies means lots of opportunities for M&As, which will help each company to grow."

For its part, Carlyle is looking to expand GGC Group in China, a bean sprouts market almost 10 times bigger than Japan.

"This is a sign that private equity firms are willing to take risks to source deals," said Soichi Takata, head of private equity at Tokio Marine Asset Management.

Bain last year bought mushroom producer Yukiguni Maitake Co for about 10 billion yen, making its first investment in raw food materials in Japan.

"Areas such as fruit and fresh vegetables are growing pretty nicely these days," Bain Managing Director David Gross-Loh said, citing a trend toward healthier living.

Carlyle Group, KKR & Co (KKR.N), TPG Capital Management [TPG.UL] opened offices in Japan in early 2000s, hoping to grab multi-billion deals through corporate carve-outs.

But the value of deals by buyout firms in Japan halved to $600 million last year from $1.16 billion in 2014, according to Thomson Reuters.