BY JEFFREY GOLDFARB

The leveraged buyout will be big in Japan. A takeover approach for Toshiba betrayed private equity’s growing appetite in the country. Breakingviews found a few dozen chunky companies that make suitable candidates, in theory. One that stands out among them is Ricoh.

Buyout shops are stockpiling money in the Land of the Rising Sun, where cheap borrowing and corporate resistance to change prevail. Dry powder available to Japan-dedicated funds, which accounted for an unusually high 7% of capital raised in the region in 2020, surpassed $60 billion, per research outfit Preqin, more than twice as much as five years ago.

Sizeable deals are uncommon, though. The Bain-led $18 billion acquisition of Toshiba’s memory-chip business four years ago was Japan’s biggest ever. Second on the list is a property manager taken private in 2007 for about $4 billion. CVC’s $20 billion offer for Toshiba in 2021 heralds a fresh chance for something hefty.

A crude Breakingviews screen of Refinitiv data for Japanese enterprises with market caps between $5 billion and $20 billion, ample EBITDA and low debt spat out a variety of prospects. Many of them could use a shakeup, but look too domestically entrenched for private equity to successfully make their case.

Copier and printer maker Ricoh is different. Although it already has implemented a restructuring to become more of a services provider, new owners could sharpen and accelerate the transition behind closed doors. The nearly $7 billion company isn’t getting much credit for its changes. After investors were initially energised by a strategic update unveiled in March by Chief Executive Yoshinori “Jake” Yamashita, the stock price retreated. Its total shareholder return has been just 4% annually on average over the past five years, less than half that of Japan’s benchmark index.

Ricoh generates more than half its sales overseas and nearly two-thirds of its employees are abroad, adding to the appeal for an international private equity firm.

Yamashita’s extended stints in the U.S. and British divisions also might help make him more receptive to an entreaty. And the company’s biggest shareholder happens to be the same pushy investor, Effissimo, rattling Toshiba’s cage. All that suggests Ricoh could be a tempting target as buyout barons supersize their yen for Japan.

First published December 2021