Unison Sees More LBO Deals as Bank Loans Grow

HONG KONG (Reuters) – Unison Capital, a top buyout firm in Japan, expects to see more leveraged buyouts in the world’s second-largest economy as big domestic banks are keen to sponsor deals, a senior executive said.

Private equity investments in Japan should be attractive this year and next year because of good valuations and returns from leveraged finance, John Ehara, founder of Unison Capital, said at the SuperReturn Asia Conference.

Japanese banks have become more active in lending because they raised money through new shares and the value of their stock holdings have rebounded, Ehara said.

“They raised capital, giving them breathing room for lending capacity,” he said. “They think they’re so much better positioned than their U.S. and European counterparts in this area.”

The global private equity market was ravaged by the economic downturn last year, and the Japan market also shrank significantly last year, prompting some private equity firms to suspend their Japan operations and leveraged finance bankers to leave their jobs.

Ehara said the market would be buoyed also because of the “very attractive valuation” in Japan.

The price Unison used to expect for acquisitions until a year and half ago was multiples of about six to eight times earnings before interest, taxes, depreciation and amortisation — a cash flow measure know as EBITDA.

Now that figure has come down to four to five times EBITDA, Ehara said.

(Reporting by Junko Fujita and George Chen; Editing by Michael Flaherty and Ken Wills)