Winning deals
Entry Award
| Prize | Entry Award |
|---|---|
| Recognized Deal/Company | Renatus Co., Ltd. |
| Fund | J-STAR Co., Ltd. |
| Reason for selection | ① Efforts to foster a circular economy The Renatus Group is made up of five leading companies engaged in waste treatment and recycling (Sincere, Shinnihon Kaihatsu, Harita, Sanwa Group, and Japan Waste). It covers the major industrial zones in the Kanto, Chubu, Kinki, Hokuriku, and Kyushu areas, and it has the second highest sales in the domestic industrial waste treatment segment, surpassed only by Daiei Kankyo. In August of this year, the Cabinet issued the Fifth Fundamental Plan for Establishing a Sound Material-Cycle Society , with the aim of solving issues faced by society. The transition from a linear economy to a circular economy is one major element of this, as, among other things, it promotes decarbonization and the conservation of resources. To achieve it, it will be important to restructure the industry and to develop enterprises with national reach who will lead this restructuring. The industry already faces various issues, such as governance issues, so hopes are high that this fund will serve as a positive example of the improvements that can be made through PE funds. ② GP-led continuation fund formation To provide equity finance to Renatus, J-STAR formed a new 20-billion-yen environmental fund and invested through this fund alongside the J-STAR No. 5 Series Funds. Through these funds and newly arranged leveraged buyouts, J-STAR acquired four environment-related companies in which it had prior investments. This provided exit opportunities for J-STAR No. 3 and No. 4 Series Fund investors while also providing investment opportunities for investors wishing to invest in environmental funds. The number of continuation funds is growing in Western countries, but many of these funds are viewed with a degree of suspicion. This fund, however, is one with highly meaningful objectives . Furthermore, it is both important and innovative because it was created by reconciling the complex interests of stakeholders, becoming Japan's first full-fledged continuation fund. |
ESG Award
| Prize | ESG Award |
|---|---|
| Recognized Deal/Company | Tsubaki Chemical Industry |
| Fund | iSigma Capital Corporation |
| Reason for selection | ① Establishment of Japan's first plastic cosmetic and toiletry container recycling company In April 2021, when iSigma Capital Corporation ("iSigma") invested in Tsubaki Chemical Industry ("Tsubaki Chemical"), there were only three plastic container recycling companies in Japan. What's more, the two companies other than Tsubaki Chemical only recycled plastic drink bottles. iSigma sought to create Japan's first recycling company that recycled plastic cosmetic and toiletry containers, so it drew up a list of candidate companies. After several years of marketing, it discovered Tsubaki Chemical and settled on the direction it would take in establishing a recycling company. Tsubaki Chemical had less than 5 billion yen in annual sales, so the construction of the recycling plant was led by iSigma, which was involved in everything from site selection to business partner selection. ② Using the GP network to expand the circle of companies with shared ideals and promote recycling When the new cosmetic container recycling plant was put into operation, it had almost no customer base. The network of GPs was used to its fullest to attract customers such as major toiletry companies and national hotel chains which used large amounts of plastic containers for their amenities. Tsubaki Chemical drew attention as a provider of a solution to a major problem facing industries in recent years. It was also decided that the stores of major retail chains would have boxes set up for collecting plastic containers to be recycled in the Tsubaki Chemical recycling plant. ③ Taking advantage of the momentum provided by the external environment and raising expectations for future growth In April 2022, after iSigma's investment, the Act on Promotion of Resource Circulation for Plastics was enacted. Tsubaki Chemical's new business reaped the benefits of this new law. Morale in the company has improved, and in Saga Prefecture, where the recycling plant was located, it has gained a great deal of name recognition, even being able to hire highly sought-after new technical high school graduates. This project was high evaluated from both environmental and social perspectives, and business results are also steadily improving. We look forward to seeing what the future holds for this PE fund investment. |
ESG Award
| Prize | ESG Award |
|---|---|
| Recognized Deal/Company | Bushu Pharmaceuticals Ltd. |
| Fund | KKR Japan |
| Reason for selection | There have been numerous cases of companies that have been acquired by PE funds issuing stock options. However, these stock options are normally available only to a limited group of company executives. This type of system can serve as a cost-cutting incentive for the executives who receive stock options. PE funds are therefore criticized for increasing corporate value by cutting the number and wages of employees. In the case of the recipient of this award, the KKR Japan - Bushu Pharmaceuticals project, however, ownership was granted not only to executives but to all employees, including part-time employees. KKR began introducing this system in the US in 2011, and while it is now being adopted by even more GPs, this was the first time this system has been used in Japan. The employee ownership system is the key to employee engagement—the self-motivated drive and desire of employees to contribute to their company. If newly motivated employees contribute to the profitability of their company and the amount of corporate value they create exceeds the amount of money they receive from the PE fund, then the PE fund has not sacrificed profit by granting the employees ownership. Under this system, cash is distributed to employees when the fund sells the company, so both the fund and the employees share the same interest in increasing the company's profitability. We see this system as having tremendous potential. However, there is no denying that this system is still in its experimental phase. For example, in the future we might see companies that use this system to strong-arm employees into taking lower wages. We present this award with the hope that this experiment will prove successful and will demonstrate that the system helps create true win-win situations for employees and funds. |
EXIT Award
| Prize | EXIT Award |
|---|---|
| Recognized Deal/Company | MORITEX Corporation |
| Fund | Trustar Capital Partners Japan Limited |
| Reason for selection | MORITEX began as a venture firm and grew rapidly. It had strong challenging spirit, but after a major European company became its principal shareholder, it started to struggle with various issues, such as a loss of agility and a corporate structure that hampered global expansion and made it harder for the company to move into new business segments. Ultimately, it remained dependent on specific business segments within Japan and was unable to realize its tremendous potential by moving into overseas markets and new business segments or by improving its supply chain. This, combined with weak management, caused its profitability to decline. It was at this point that Trustar Capital Partners became an investor and restructured the company's overseas sites to be sites suitable for global business. As a result, overseas sales grew four-fold (the overseas sales composition ratio increased from 10% to over 30%). It also overhauled the company's R&D and production system, which was spread across Japan and China. MORITEX built a new plant in Vietnam to further improve QDC and optimized the global value chain, with R&D functions handled by Japan and production handled by China and Vietnam. Previously, the company's business had largely been limited to Japan and to semiconductor-related fields, but Trustar Capital Partners provided wide-ranging overseas development support that included everything from market research and strategy formulation to the identification and referral of potential customers. Through these efforts, MORITEX succeeded in expanding its business from one focused on semiconductors to one that also included electronics, logistics, food, renewable energy, automated driving (LiDAR), electric vehicles (EV batteries), and more. The exit route was a global industry leader in the US. The fact that there were no Japanese companies that could serve as the exit route provides a glimpse of the recent realities of the Japanese manufacturing industry and an opportunity to reflect on them. This project was evaluated highly for all three of the standards used to evaluate exits: (1) the novelty, innovativeness, originality, and competitive advantage of the investment , (2) the added value created by the fund, and (3) returns. With respect to returns, in particular, the figures involved were exceptional, supporting the claim in the award submission that the project "achieved one of the top investment multiples in PE history." The exit took eight and a half years, but during this time, MORITEX and the PE fund worked together as one to realize the company's latent value and transform it into a highly competitive global company. We present this award with the hope that this will serve as a success study that contributes to future growth. |
Selection Panel
Member
Toshiko Oka
Professor
Meiji Business School -Graduate School of Global Business-
Meiji University
Member
Kazushige Kobayashi
Managing Director
MCP Asset Management Company Limited
Member
Kazuki Nakamoto
Partner
The University of Tokyo Edge Capital Partners Co., Ltd.
Member
Hideaki Fukazawa
Managing Director
Izukichi Company Limited