Japanese buyout firm J-STAR has completed what is understood to be the first continuation fund deal in Japan with a multi-asset GP-led.
Neuberger Berman was the lead investor on the transaction, which saw J-STAR move four waste treatment and recycling assets into a holding company named Renatus, backed by a continuation fund as well as the firm’s ¥75 billion ($507.7 million; €465.1 million) flagship J-STAR No5 Investment Limited Partnership, according to statements seen by Secondaries Investor.
The continuation fund includes follow-on capital to fund future unidentified bolt-on investments by Renatus, the statements said.
The continuation vehicle received aggregate capital commitments of ¥17.9 billion, the statement said. In total, the transaction was $200 million in size, according to a source familiar with the deal. The transaction launched around a year ago, the source added.
Metal recycling company Harita Metal, car dealership company Sanwa Group, recycling and building maintenance business Sincere Holdings and waste oil treatment business SNK Holdings were moved into Renatus. The holding company will seek to “proactively and independently address global-scale environmental issues that are difficult for a single company to tackle, and to grow into a leading environmental solutions company in Japan in the future”, according to a statement.
The assets were moved from three funds raised from 2017 through to 2022 – the ¥32.5 billion J-STAR No3 Investment Limited Partnership, the ¥48.5 billion J-STAR No4 Investment Limited Partnership, and Fund 5.
Evercore advised on the transaction.
Tokyo-headquartered J-STAR was considering GP-led continuation funds to supplement its heavy bolt-on activity, partner Tatsuya Yumoto told affiliate title Private Equity International last year.
The firm aims to complete an average of two to three add-ons for each portfolio company acquired by its fifth flagship fund. One possible risk associated with buy-and-builds is that of breaching a fund’s concentration limits, which prevent any single asset from receiving too much capital.
“We’re considering several new tools and techniques to maximise the return for our investors, one of which is GP-led secondaries transactions,” investor relations principal Kenta Shima said at the time, noting that the firm had received pitches from advisers about the potential use of continuation vehicles for older vintages.
“Another idea we are considering is a single-asset GP-led… to provide liquidity to younger vintage funds whose DPI isn’t that high yet. And at the same time for us, because we do lots of add-on acquisitions, we also have to be very careful about the concentration limit of each one.”
Japan generated 21 private equity buyouts in 2022 with the average deal size coming in at $750 million, down from the 28 buyouts seen in the country in 2021 with an average size of nearly $900 million, according to Bain & Co’s APAC Private Equity Report 2023.
By geographical focus, Asia and Australasia accounted for 4 percent and 5 percent of LP trades and GP-leds, respectively, in the first half of this year, according to Campbell Lutyens’ mid-year report.
Notable deals in APAC last year include one launched by market stalwart Pacific Equity Partners, which rolled its stake in smart metering business Intellihub into an A$1.5 billion ($989.8 million; €906.9 million) single-asset continuation fund following a strategic sale of half of its stake. Crescent Capital Partners, Hosen Capital and Quadrant Private Equity also closed single-asset continuation funds during the year.