How BDA Partners Became the Leading Cross-Border M&A Advisor for Japan’s Private Equity Market

In recent years, Japan has stood out in the private equity market, recording a 20% increase in deal values in 2023 followed by another 8% jump last year. This stood in stark contrast to the broader Asia-Pacific region, which has seen deal values contract. However, Japan's M&A market remains relatively small—especially when compared to that of the U.S. and the U.K. What are your thoughts on this contrast?

We’ve followed the development of the industry since the early 2000s—BDA was founded in 1996. At the time, our focus was primarily on advising multinational companies entering Asia, helping them pursue acquisitions or joint ventures to expand their regional presence. However, that proved to be a difficult business model with a low success rate. You could knock on hundreds—if not thousands—of doors, but the number of deals that actually materialized remained quite small.

As private equity (PE) began to emerge and we partnered with some U.S. banks that were growing rapidly advising on PE transactions, we recognized that this was the space we needed to focus on. We saw early on that PE would grow significantly across Asia. That marked the beginning of our work supporting PE funds, not only in sourcing investments but also in managing exit strategies.

Even today, however, Japan’s PE market remains very different from that of the U.S. Historically, this has been due to cultural reasons. When I started, "M&A" was practically a taboo word, no one wanted to talk about it. If you called someone and mentioned acquisitions, the door would be shut immediately. In the early days, PE funds were viewed as “vultures”, entities that would come in, cut costs and staff, and ultimately weaken the business. Over time, though, deal by deal, that perception has shifted. PE funds have spent more than 20 years carefully building trust and proving that they can be positive partners for companies. Today, given more familiarity in Japan with M&A and greater accountability at the board level to drive shareholder value, we’re seeing large corporations engage with PE firms to divest non-core businesses or subsidiaries.

The difference in perception compared to the U.S. is striking. In the U.S., the market is very liquid with annual value of PE deals more than 10 times that of Japan. In Japan, the cultural context is very different. The Japanese PE market has come a long way, but if it’s to reach the scale of the U.S. market, continued evolution will be necessary.

Today, many Japanese corporations are far more comfortable and experienced with M&A. Some are already seasoned partners to PE funds, while others are still in the early stages. This range will continue to exist, but the broader shift is clear: PE is no longer seen as predatory. Japanese PE funds are especially cautious when managing relationships with management teams, knowing that any misstep could jeopardize future opportunities. One wrong move could tarnish their reputation and cost them the next deal.

In summary, the biggest difference is that in the U.S., PE firms tend to control everything. In Japan, success requires respect for management, employees, and customers. PE funds that understand and navigate these dynamics effectively are the ones that thrive in the Japanese market.

The second major pillar driving the transformation of Japan’s market has been corporate governance reform. The Abe administration played a pivotal role in introducing the Corporate Governance Code a decade ago, which has since been revised. More recently, we’ve seen the Tokyo Stock Exchange (TSE) place increased pressure on companies to enhance their valuations, alongside METI’s new guidelines for corporate takeovers. In your view, what impact have these corporate governance reforms had over the past ten years, and what kind of influence do you expect them to have in the years ahead?

The most significant impact has been the cultural and mindset shift. One of the key differences between Japan and the U.S. lies in the prioritization of shareholder returns. I often say that in Japan, the corporate pyramid is inverted: shareholders are at the bottom, while customers, management, and employees sit at the top. I believe that’s genuinely how many Japanese managers approach decision-making.

The recent governance reforms have started to change that dynamic in a meaningful way. They’ve opened up a broader set of deal opportunities for private equity. For the past 20 years, most transactions in Japan were driven by succession issues with businesses needing to sell because the next generation either wasn’t willing or didn’t exist. If owners had the option, many would have preferred not to transact. Founder-owned companies have been the primary source of PE deals in Japan to date, and as a result the average deal size has been relatively small.

That said, things are changing. The Tokyo Stock Exchange is now suggesting that certain listed companies that are underperforming perhaps shouldn’t be listed at all. In the past, when PE funds approached these companies, they were often ignored. But now, external board members face legal obligations to seriously consider bona fide offers, and this has led to the number of privatization deals doubling in 2024 from historic levels.

Larger corporations are also under growing pressure. If they’re going to remain listed, they need to improve their financial performance. That’s led many to divest non-core subsidiaries and focus more sharply on their core businesses, creating further opportunities for PE firms. In fact, over the past two years, a significant share of deal volume has come from these types of carve-outs, and as a result the average deal size is getting larger.

Another important factor is the shift away from China. Many large investors have been shifting allocations away from China, and both Japan and India have emerged as major beneficiaries. Even some Chinese funds, under pressure from their investors to avoid domestic investments, are redirecting capital to Japan. These trends likely wouldn’t have gained such momentum without the parallel push from the Japanese government’s reform initiatives.

Overall, I believe Japan presents a fundamentally attractive market for private equity. Margins and growth rates may be lower than in the U.S., but if a fund enters with a focused strategy—supporting management in areas like international expansion and operational efficiency—Japanese businesses often respond quickly, improving margins and accelerating growth.

Do you believe sectors such as food and manufacturing will continue to consolidate with the support of private equity funds, ultimately bringing Japan more in line with international markets like the U.S. or the U.K.?

We’re already seeing consolidation, particularly in sectors that are under pressure and need to adapt in order to survive. In these industries, companies often have no choice but to merge because without improving efficiency, they simply won’t make it. This trend of consolidation will absolutely continue, and private equity has played a key role in driving it. I believe PE will continue to be a major force behind this shift.

That said, I think the focus is now beginning to shift more toward growth strategies—specifically, how to help companies expand overseas. While consolidation will remain a common and important theme, I don’t believe it will become the dominant one across Japan.

One of the unique aspects of Japan’s M&A landscape is the absence of distinct sell-side and buy-side advisors. Traditionally, a single M&A broker manages the entire transaction on behalf of both parties. As a firm that has been in Japan since the 2000s, how did you navigate the peculiarities of the market?

The broker model you mentioned is certainly unique to Japan and tends to be used primarily for smaller transactions, where the broker collects fees from both the buyer and the seller. In some ways, it’s a clever business model, so credit to those who make it work. But I don’t think it aligns well with the current dynamics of the private equity market, where the focus is on maximizing value and where it’s standard practice to have dedicated advisors on both sides of the transaction. As private equity has grown, so too has the advisory market, and I believe it will continue to expand, particularly as corporate governance reforms progress. We’re very optimistic about these developments.

When I first joined BDA, we were primarily representing international buyers entering the Japanese market, which made things particularly challenging under the broker model. Because we operate across all Asian markets, we had to invest heavily in building our network and reputation here before companies were willing to trust us. Those early conversations were interesting, to say the least. It was an excellent way to establish relationships, but it wasn’t always the most sustainable business model.

That’s why, around 2006, we began shifting more toward the sell-side, focusing increasingly on working with private equity funds. What helped differentiate us was our global perspective and our ability to bring in international buyers, something that set us apart from more domestically focused players.

Looking at your track record, we’ve noticed that BDA Partners has advised on some highly technical deals involving specialized companies in the manufacturing and technology sectors. What would you say is your unique value proposition when it comes to navigating the complexities of such specific and technically demanding industries?

As we shifted toward the sell side and focused more on private equity clients, we also began developing a sector-focused approach. At BDA, we have dedicated sector teams covering key industries, and as deal sizes increase, clients naturally expect deeper sector expertise. Our teams are constantly engaging with companies in semiconductors, materials, and other specialized fields.

What sets us apart—and why clients hire us—is our ability to offer the best insights and access to the right potential buyers. We know who’s most likely to be interested, and that knowledge stems from our extensive global coverage across these sectors. That’s a key differentiator for us.

Looking ahead, which sector do you believe holds the greatest potential for BDA Partners in the coming years?

Anything related to semiconductors will be absolutely critical. It’s a highly sensitive sector, and we recently advised ON Semiconductor on the sale of their Niigata plant. That deal had an interesting history as it began around the onset of COVID-19 in 2020. At that time, the political environment still allowed for Chinese buyers, though there was some reluctance. Once the pandemic hit, however, the stance shifted firmly against Chinese participation as the semiconductor supply chain became a strategic asset.

Despite current geopolitical tensions, I believe we’ll continue to see strong cross-border linkages between Japan, the U.S., Europe, Taiwan, and Korea. Japan remains unique in that it possesses key enabling technologies that are essential to next-generation chip development, so this will be a very active sector for us going forward.

That said, there’s also significant opportunity in IT services and software, where Japan still lags behind the U.S. in terms of investment in digital transformation. This gap presents a growth opportunity, and global players are increasingly looking for ways to tap into it, driving more cross-border activity. From a private equity standpoint, IT services are appealing as they tend to offer steady growth and strong cash flow, so I expect to see a lot more PE investment in this area.

At BDA, we cover software across Asia, though the U.S. remains the most active and attractive software market. Still, we’re optimistic that homegrown B2B software companies in Japan and across Asia will continue to grow and scale. That could become a very interesting pipeline for future deals.

How does your approach to succession-driven deals differ from how you typically work with private equity firms?

The approach is actually quite similar, but in Japan, differentiation is key. I think the fact that I’m Canadian helps in that regard because I bring an international perspective that resonates with many clients.

When working with family-run businesses, some have successfully expanded into Asia, while many others have struggled. Our role is to help them take the next step, whether that’s by introducing a private equity fund or a strategic buyer. The most important thing is to reassure them that we will respect the family legacy while also helping them position the company for long-term success.

Many of these businesses can’t transition to the next generation and are uncertain about the future direction of the company. What we do is help them find a partner that can carry the business forward—often toward global expansion. That’s where we bring real value.

In recent years, we’ve seen an increase in large-scale deals involving firms like KKR and Bain Capital, and this activity is gradually filtering down into the mid-market segment. At the same time, foreign corporations are becoming more active in making strategic acquisitions in Japan. How do you see the Japan-in space evolving over the coming years? And what unique advantages does BDA offer in this area, given your presence both in Japan and across global markets?

There are strategic reasons why companies are looking closely at Japan but those don't apply across all sectors. Many are drawn by the opportunity to access Japan’s large customer base. They also recognize that Japan is a challenging market, and without acquiring a local platform, success is unlikely. That’s a key driver behind the growing interest.

More importantly, while some firms have historically struggled to close deals in Japan, the current environment has improved. There’s now a stronger possibility of getting deals across the finish line. That’s why we’re getting calls from clients saying, “We’ve been tracking this company for a while and we want to make an acquisition.” The structural changes we’ve discussed today are making deals more actionable. Investors are more willing to invest their time if they genuinely believe there’s a realistic chance of closing.

I’m optimistic these changes will continue. They’re encouraging a greater focus on shareholder returns and fostering more rational decision-making. When we speak with companies about their goals, there are some truly exciting stories emerging. The overall mindset has shifted significantly, it’s far easier to engage with businesses now than it was 20 years ago.

Throughout this interview, we’ve discussed the surge in inbound investment into Japan, but we’re also witnessing a notable increase in outbound investment—particularly for strategic reasons, such as market entry into India. What are your thoughts on this growing trend of Japanese companies investing overseas?

Currently, about 20% of our deals are on the buy-side, and the vast majority of those involve Japanese companies. That’s because there’s strong demand and a clear strategic need for overseas growth. This is where we’re able to support our clients most effectively.

We typically help them identify new opportunities, whether in Asia, the U.S., or Europe, that allow them to access new markets or acquire new capabilities. Our approach is to find these opportunities outside of highly competitive processes, which increases the chances of success and creates more strategic value.

I believe this need for outbound investment will remain strong. In fact, I expect to see more deals driven by geopolitical developments, such as new tariffs. These may lead to what I’d call “defensive” investments: transactions that help Japanese companies de-risk and expand their manufacturing footprint, particularly in the U.S.

Given the current volatility in global markets, how do you see the role of the Japan office evolving in the years ahead?

While Japan is currently enjoying strong momentum, India is also an extremely active market. Our Japan office is very important to us, and the team here is working hard to make the most of the opportunities in the current environment.

BDA has a history of collaboration with the Development Bank of Japan, as well as with other global partners. How important are these types of partnerships to BDA’s overall strategy?

The Development Bank of Japan (DBJ) is a very important partner for us. Our partnership with DBJ has been ongoing for about seven years now and they’re also a shareholder in BDA, which provides us the ability to work closely together with alignment of common objectives.

In the M&A world, many partnerships exist in name only, and without genuine commitment, they often don’t deliver results. But with a partner like DBJ, which brings not only credibility but also deep relationships across Japan—and is backed by the Japanese government—we’ve gained a powerful vote of confidence. This relationship has significantly raised BDA’s profile in Japan.

Together with DBJ, our goal is to help Japanese companies expand globally. DBJ is actively financing and supporting many of Japan’s largest corporations, and through this collaboration, we see opportunities emerging across a number of strategic fronts.

Out of the many deals BDA has completed, is there one in particular that you feel best illustrates the value you bring to Japanese companies?

On the buy side for Japanese clients, our core value lies in bridging the gap between different cultures, languages, and business practices. We’re able to communicate effectively with international counterparts, understand their position, and then relay that back to our Japanese clients in a way that’s clear and culturally appropriate.

If that bridge doesn’t exist, communication gaps emerge, emotions can escalate, and deals often fall apart. Our role is to fully understand both sides and to facilitate alignment in a way that keeps the deal on track and builds trust throughout the process.

As M&A activity continues to surge, we’re seeing a growing number of new entrants in the cross-border transaction space. How competitive do you expect the market to become over the next few years?

Competition is increasing dramatically, and a big part of that is due to the fact that we’re now working on larger deals where we naturally encounter global players. Japanese banks are also stepping up their capabilities in global auction processes, and they’ve been doing so by pursuing acquisitions or forming strategic partnerships. The landscape is becoming much more competitive, especially as more institutions aim to operate effectively on a global scale.

If you had to choose one deal that stands out as particularly meaningful to you personally, which would it be and why?

FICT, although a recent deal, stands out as a landmark transaction for us, and one that was highly international in scope. We had very close relationships with many of the global investors and buyers involved, and international participation played a critical role in shaping the final outcome. I believe we added significant value by managing those cross-border interactions and effectively interfacing with all the international stakeholders.

FICT is a fascinating company with cutting-edge technologies that are helping drive the development of next-generation chips. They also have a truly outstanding leadership team. It was a privilege to support them through such a strategic and impactful transaction.

As the leader of BDA Partners’ Japan office, is there an ultimate goal or objective you hope to achieve during your tenure?

From the Japan perspective, our goal is to be recognized as one of the leading advisors to private equity in the country. Right now, based on the numbers our team is compiling, we’re certainly within the top five—but I believe we have the potential to reach number one.

Looking back, I’m extremely proud of what we’ve accomplished. Over the years, we’ve built exceptionally strong relationships with private equity funds, and they clearly recognize the value we bring to the table.

I believe we’re now entering a “Golden Age” for Japan. While the market isn’t yet as liquid as the U.S., it’s becoming much more open, and private equity is poised to be a major growth sector over the next decade. We’re very optimistic about BDA’s role in that evolution and confident that our business will play an increasingly significant part in this dynamic market.

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