The transaction value of private equity and venture capital deals in Japan plunged in the first half year over year, while the volume of deals remained roughly the same.

Private equity was involved in 35 transactions during the first half, with a total disclosed transaction value of $180 million. In the comparable 2022 period, there were 34 announced deals, including whole company, minority stake and asset acquisitions, with a total disclosed transaction value of $10.15 billion.

The decline in transaction value could be due to the absence of take-private transactions, which tend to be larger deals and where competing bids could further drive up value.

"Transaction value was driven by super-large projects such as the delisting of a listed company, but I understand that it decreased because there were no such projects [in the first half of 2023]," said Tomoki Miyamori, head of the private equity department at Nihon M&A Center Inc., a Japanese M&A advisory firm.

All 2023 first-half private equity deals targeted unlisted companies. During the comparable period in 2022, transactions included KKR & Co. Inc.'s $6.04 billion privatization of Hitachi Transport System, which closed in November 2022. This was Japan's second-largest private equity deal in 2022 after the pending $14.86 billion acquisition of Tokyo Stock Exchange-listed conglomerate Toshiba Corp. by an investor group including Japan Industrial Partners Inc.

– Read about a huge step back in private equity fundraising in 2023. – Set up alerts for future private equity Data Dispatches. – Download a spreadsheet with data featured in this story.

Transactions targeting small private Japanese companies are expected to increase.

"The number of funds investing in companies with an EBITDA of less than ¥500 million is increasing. Approximately 700,000 companies are considering selling due to the lack of successors [to the founders], so the number of funds that invest in small companies is increasing in order to take over," Miyamori said.

Topping the list of the largest private equity transactions in Japan in 2023 was KKR's deal to acquire an additional 20% stake in food retailer Seiyu GK for $163.7 million. In second place was SHIFT Growth Capital Inc.'s acquisition of software company CREIT Solutions Inc. for $13 million.

Fundraising front

For the year through June 30, four private equity and venture capital funds launched that included Japan as geographic focus. The funds have a combined maximum target fund size of $1.41 billion, close to half the targeted size of the 22 funds that launched in full year 2022.

The largest of the new vehicles is Marunouchi Capital Inc.'s Marunouchi Capital Fund 3, which launched in March. A first close in April raised $301 million, according to S&P Global Market Intelligence data. The buyout fund counts Mitsubishi Corp. as a limited partner, and its primary geographic focus is Asia.