What has Carlyle's experience been in Japan and are you bullish on the country?
We've recruited a team to do buyouts and venture capital in Japan. But we haven't made any investments. Our view is that the Japanese economy has been in a no-growth period for nearly a decade, and therefore there is a lot of reason to be sceptical that things are going to change overnight. Our view, however, is that there aren't a lot of competitors in the private equity area in Japan. We think we can be on the ground floor of private equity growth. I can't predict that the Japanese economy is going to start growing at 3-5% a year, but I do think some of these companies will begin to restructure in the same way American companies did 20 years ago, and so there will be opportunities.
On the venture capital side, I believe that while Japan was not a technology leader in the 1990s the way it was in the 1980s, I think it will be more of a leader this decade - in part because of a lead in wireless technologies. So we're quite optimistic in this respect.
We will have the largest buyout and venture capital teams of any non-Japanese based organization. We'll have 35 investment professionals and we've recruited all Japanese professionals. But clearly it takes time to recruit people, raise funds and do deals in Japan. So I don't think it will be easy, but there are opportunities.
You are in Japan. What's the purpose of your trip?
Firstly, I'm meeting with professionals we've already hired. Secondly I'm recruiting a few additional people. And thirdly I am meeting some prospective investors for our Japan fund.
How much are you planning to raise?
We are planning to raise a $500 million buyout fund and $250 million venture fund.
Do you think getting buyout deals done in Japan will be even more difficult than it's been in Korea?
Well, Korea probably has more of a history of private equity and has an economy which is open to selling assets. Japan will move a little more slowly in that direction. Korea had some economic problems, and people had to sell assets. That meant we could buy things. In Japan I'm not sure there's quite the crisis atmosphere there was in Korea. Therefore I wouldn' t say it's going to be easy. But it is the second largest economy in the world and there are relatively few private equity groups in Japan, so there will be less competition for investments.
Our prospects are good because we've put together a very good team. We have a Japan advisory board too which is comprised of a lot of very prominent Japanese business figures.
We wanted to focus on Asia first and then Japan, and we think our timing is right.
When do you expect to complete your fundraising and start investing?
We are going to finish raising these funds by the end of the year and we are looking to invest right away. We have other funds we could use, and we can raise money on a deal by deal basis. We have a team that is looking to invest in Japan and if a deal comes along we will do it.
I expect we will make some investments within the next several months.
Who have you hired?
On the venture side, we have Higashi-san, who was the former head of Intel Capital's Japan team. On the buyout side we have two MDs. Nagao-san was a former M&A person for Sumitomo Bank, and he's been with us almost a year now. We think he will have one or two buyouts to do this year. Asakura-san is the other MD and he's a Harvard Business Graduate and a senior person at Apax, another private equity firm.
We already seven professionals on the venture team and on the buyout team we have 11.
It is easier to do venture investment - it's much less complicated than on the buyout side. So we'll probably do a couple of venture deals in the next month or two.
Who is on your Japan advisory board?
We have former Secretary of State for defence, James Baker and Frank Carlucci, another defence secretary. Then we have Harada-san, who is the chief economist for the research institute of Sanwa Bank. We have Michael Armacost, the former US ambassador to Japan (1989-93); Yoshihiko Miyauchi, Chairman and CEO of Orix; Taizo Nishimuro, chairman of Toshiba Corporation; Hori-san, the former president of Boston Consulting Group of Japan and Naoyuki Akikusa, the president and CEO of Fujitsu.
Do you envisage great opportunities from the unwinding of cross-shareholdings?
Not probably for what we do. Cross-holdings are publicly traded. The best opportunities will come from Toshiba or Hitachi, which might have 500 subsidiaries saying we need to have 300 subsidiaries and over a period of time we are going to sell some of them.
