Japan’s PE market shows resilience amid global decline

Private equity deals are likely to sustain their relatively high momentum in 2024, although asset managers may face challenges sourcing the right local talent.
Japan’s PE market shows resilience amid global decline

While other private equity markets have struggled to see activity, the situation has been different in Japan.

Mergers and acquisitions (M&A) activity in the Japanese private equity market showed resilience in 2023, and expectations are that this trend will continue in 2024. One potential headwind is that recruiting local private equity professionals may be a challenge for asset managers active in Japan.

Massimo Borghello, WTW

Massimo Borghello, head of human resource M&A consulting in Asia Pacific at WTW, sees two domestic influences and themes supporting and accelerating Japanese corporate transactions in 2024.

One is the the Tokyo Stock Exchange’s call for greater capital efficiency, and the other the issuance of guidelines for corporate takeovers by the Ministry of Economy, Trade and Industry in Japan.

“We believe the combination of these two factors will put pressure on Japanese corporates’ behaviour and have some impact on PE buy-out activity as well.  Several large corporates will try to restructure or divest to increase capital efficiency or will seek support for take-private deals to ease off activists’ pressure while they try to restructure their business,” Borghello told AsianInvestor.

The driving factors for 2023 are still relevant while interest rates in Japan remain low by global standards. WTW also believes some outbound global deals were slowed down by the weakening yen late last year and could well be back in play in 2024. 

“In terms of challenges, continuing yen weakness may make it harder to pursue outbound global deals from Japan,” Borghello said.


The Japanese private equity market saw deal activity of $25.1 billion in 2023, and $49.7 billion including deals involving direct limited partners (LP), according to alternatives data provider Preqin’s Japan Territory Guide.

Angela Lai, Preqin

The values transacted in 2023 are the highest in Japan for a long time. Angela Lai, head of Asia Pacific and valuations at Preqin’s Research Insights team, explained that this number included the very large Toshiba take-private deal, creating a one-off effect. By deal count there was a slight decline, according to Lai.

“However, what is remarkable is the fact that Japan buyout activity was more resilient than many other markets, such that by volume Japan was the most active buyout market in APAC in 2023. Japan buyout valuations even improved in 2023 while other markets were still seeing weakness,” Lai told AsianInvestor.

The region saw 155 deals completed in 2023, according to WTW’s Quarterly Deal Performance Monitor. As with other regions, Asia-Pacific deal volumes remained depressed, down 23% compared to 2022.

Global deal volume was down 27% with 619 transactions completed in 2023, compared to 853 in 2022, driven by persistent inflation, rising interest rates and geopolitical instability.

“We expect the strength to continue into 2024 as our investor survey shows Japan to be the most attractive developed market in Asia, likely attracted by stable historical returns and the favourable exchange rate,” Lai said.


Japan's private equity and venture capital markets are characterized by lower valuations compared with overseas markets, a pattern that mirrors its public markets, according to Preqin. This means that exits are relatively easy since returns can be achieved via operational efficiency and margin improvements.

Moreover, investors in Japan-focused private equity can often expect steady payouts, as shown by net capital distributions year after year – noteworthy given that liquidity and cash flow have become increasingly important to investors worldwide.

Martin Eastgate,
Ferguson Partners

Rising M&A activity has bolstered demand for investment professionals in and around the private equity space, according to Martin Eastgate, managing director of executive search at alternatives recruitment specialist Ferguson Partners, based in Tokyo.

Global asset managers are also seeking to build out sector specialisation from one alternatives type to others, often beyond private equity, in order to be able to approach deals from different starting points and profit from plays spread across private equity, infrastructure, and real estate assets.

However, it can be a challenge to find the right hires, from senior levels down through mid- to junior levels.

"Whilst there has been some expansion in the private equity and alternatives space, the talent market is still relatively illiquid and tight, and the majority of mid-senior level candidates will not be actively seeking new role,' Eastgate said.

"As such, for new market entrants looking to start up a team, it is important to manage expectations about the depth of the potential candidate pool and timeline."


While some very large transactions have involved conglomerate spin-offs and restructuring, many more deals inhabit the midmarket or below. Small- or mid-cap private equity plays in Japan often involve corporate carve-outs and succession opportunities.

To access these deals, global asset managers need local private equity professionals to navigate the corporate culture, but these candidates can be hard to attract in an illiquid labour market.

“We often find a lift in salary, may not necessarily encourage a candidate to make a move, rather nature of the role, career path and stability will be as important. Senior investment professionals will consider a move where there is a low ceiling in terms of a manager who will likely be in suite for a number of years; and the opportunity to become country lead for a new market entrant will be attractive,” Eastgate said.

In such cases, a potential candidate might consider joining a new market entrant in a leadership role, although the hiring company would often need to factor in a 12-month non-compete period if they are hiring from a direct competitor. Lateral high-level hiring within the market can become complicated, forcing asset managers to look for private equity talent elsewhere.

“To increase the potential candidate funnel, we often try to include Japanese professional currently working overseas, especially if they have been working in major finance markets such as New York, London or Singapore," Eastgate said.

These professionals will ideally have worked at a global firm, but Japanese trading houses are increasingly also in contention. For mid-level roles, candidates from such employers can work out because local trading houses often have investment arms with private equity vehicles.

While tapping returnee candidates from consulting or investment bank backgrounds are a good way to circumvent the illiquid talent pool in Japan for junior or mid-level roles, asset managers sometimes struggle at the more senior level.

“At the junior to mid-level you have more flexibility, and potential candidates for corporate private equity roles will come from investment banking or consulting, often following an MBA, but it does get harder at the more senior level," Eastgate said.

"Whilst there are some senior investment bankers who have made the transition successfully, clients will often focus on experienced investment professionals with a track record, and who have ideally round tripped on a deal."

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