Advantage Partners expands in Asia

By Alison Tudor, Asia Private Equity Correspondent

HONG KONG (Reuters) - Private equity firm Advantage Partners has set up a team in Hong Kong to help ease mergers between sometimes uneasy bedfellows, Chinese and Japanese companies.

The biggest private equity fund headquartered in Japan, Advantage Partners says a key focus is on helping companies it already owns tap into China's fast-growing domestic market.

"The most important objective of the Hong Kong office is to support our current or future portfolio companies in Japan as they look to expand in Asia," Emmett Thomas, Head of Asia for Advantage Partners, told the Reuters Hedge Funds and Private Equity Summit in Hong Kong.

As its Asian business develops, it plans to partner with Japanese companies looking to make purchases in China or help Chinese firms seeking a toehold in Japan, the world's second-largest economy.

"Japanese companies and Chinese companies have different strengths that can be complimentary ... We hope to be a catalyst for them to mingle," said Taisuke Sasanuma, one of Advantage Partners' founders.

There has been very little cross-border M&A between China and Japan to date.

Many Japanese companies have lost money in joint ventures with Chinese firms in recent decades, which has left a sour taste.

Still, the growth of China's domestic market and Japan's ageing population mean Japanese firms will continue to assess opportunities in China.

As for Chinese companies, it has only been in recent years that they have grown big enough to realistically contemplate making major acquisitions in Japan.

"Valuations of Chinese and Japanese companies have been getting closer. This year might be a good year for Chinese companies to seriously consider making acquisitions of Japanese companies or acquiring minority stakes," said Sasanuma.

Machinery, food manufacturing and pharma industries in Japan are worth a look, he said.

Thomas said his Hong Kong-based team of six is already working with a couple of Advantage Partners portfolio companies to evaluate potential small acquisitions of Chinese assets.

Sasanuma noted that Japan's experience of rapid growth after World War Two may be useful to Chinese companies, such as overcoming environmental problems.

"They do not need to retrace the same problems that Japan experienced," he said.

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