Sourcing refers to the stage where we select candidates for investment and make initial approaches. Companies that are considering selling their shares are referred to us by specialists like M&A brokers, financial advisors, banks, securities firms, accounting firms and other financial institutions. However, our Group specializes in making direct approaches to business owners through the independently developed networks of its management and staff. Therefore most of our buyout investment track records to date have been proprietary deals. Contrary to our strategy, there exist funds whose main sourcing focus on bids organized by financial advisors.
Mercuria Holdings
Buyout Investment
Our Group makes equity investment in business and aims to improve the enterprise value of investees. By acquiring a majority stake in investees, in general, we aim to participate in the management of investees through the dispatch of its own employees and outside professionals. After establishing a medium-to long-term growth story through repeated discussions with the investee's management, we use various methods such as business expansion and reorganization, and structural reforms to accelerate the investees' growth.
We earn returns from each investment for around 3-5 years usually and then complete divestment by transferring them to a party that is likely to contribute to the further growth of the investee or supporting the investee in listing its shares (see "Investment Process" later in this section for further details).
Investment Types
Business Succession
Against the backdrop of low fertility and population aging, the peak age of SME owners in Japan has also risen (reaching 69 in 2018) and smooth business succession is an urgent issue for the Japanese economy. Most of our track records regarding Group's buyout investment are Business succession. Not only our proposals tailored to the concerns and growth strategies of owners, but also our transparent governance framework stemming from the fact that the Group itself is a listed company, and the presence of the Development Bank of Japan Inc. as a shareholder are all highly rated by owners considering business succession. They are also our strengths when it comes to buyout investment.
Going Private
This is when companies that are already listed decide to go private, taking into consideration factors such as the realization of swift decision-making, the implementation of medium-and long-term strategies, and the non-monetary costs involved in listing. Drawing on our network and the knowledge we have accumulated to date, our Group propose growth strategies for after going private through detailed meetings with investees. In the past, we have supported Tsunoda Corporation Limited and MUTUAL CORPORATION in going private.
Carveout
This is when a parent company sells a subsidiary or division for the purpose of "business concentration and selection" and the sold subsidiary or division is transferred to a fund. Also for the sold subsidiary or division, this is an opportunity to further develop its own unique strengths and consider and form alliances with new business partners through the fund's extensive network.
Business Revitalization
This is a case in which a company is judged to have a high possibility of restructuring even though it has fallen into financial difficulties due to rapid changes in the external environment, etc.. By carrying out accurate due diligence (see "Investment process" later in this section for further details) with a sense of urgency, we analyze the turnaround potential of the investment candidate and also consider the possibility of leveraging our Group's network and previous investment experience to offer support.
Investment Process
01.Sourcing
02.Due Diligence and
Implementation of Investment
With the support of outside consulting companies, law firms, accounting firms and other specialists, we spend several months conducting due diligence (DD) on investee candidates. DD is a process through which we gain an in-depth understanding of the business of investee candidates including their finances, taxes and legal affairs, their business and environmental performance. We decide whether or not to invest based on the information obtained through DD and numerous interviews with the management of investee candidates. By identifying the strengths and weaknesses of investee companies through DD, formulating business plans covering sales and cost improvements, and discussing with the management of the investee company issues such as staffing plans which need strengthening, we increase the possibility of realizing growth strategies.
03.Management Support
This is the phase in which we demonstrate our deep commitment to management and monitor progress, with the aim of enhancing the enterprise value of the investee. We support the management of investees from a variety of perspectives, including our cross-border hands-on approach(expansion of overseas business using our overseas network) and the improvement of business operations. In addition to dispatching our Group's employees, so-called "hands-on support", we may also hire appropriate personnel from our Group's pool of professional managers and ask them to lead onsite. In cases where the investee is outside the Tokyo area or its affiliated company is located overseas, our employees sometimes spend several months working onsite. In this way, we work together with our investees to solve their business challenges and build strong relationships of trust with them.
04.Exit
Exit refers to the stage when our Group's involvement ends either through the sale of investee’s stake held by a fund or through the listing of an investee's shares. However, even when the capital relationship ends, we maintain a good relationship with the investee. Since the timing of the exit represents a major management turning point for the investee, we consult with the investee's management carefully and select a buyer judged to be the most beneficial for the investee's growth. We usually sell to a party that is suitable as the investee's next business partner, taking growth synergy into consideration, but we also sometimes list the shares on the stock market and sell them in the open market.