Put money into a Japanese business without running it

What gets bought

• A Japanese business that has traded ten years or more, makes money, and is for sale because the owner is retiring with no successor. Japan loses about 60,000 of these a year, around half of them profitable on the day they close.
• Price between ¥30M and ¥300M (about A$270K to A$2.7M). Typical asking price is two to four times operating profit. Most listings are not worth buying; the work is finding the few that are.
• Management or a key employee stays, or an operator from our own list goes in. Nothing that only works with the founder in the room.
• Boring is good: manufacturing, services, hospitality with real estate, online businesses with repeat customers.

How a deal is built

• One business, one vehicle. You back a specific company you can read about, not a blind fund.
• The vehicle is a Japanese structure run by a licensed or notified Japan-side operator. They hold the money, make the capital call and report. Japan Deal Flow sources, vets, structures and stays on as sponsor. Japan Deal Flow never holds investor money.
• Five to eight investors per deal. Hold three to five years. Exit to the operator, a strategic buyer, or the next investor.
• The exact legal shape (a notified fund, a direct shareholding deal by deal, or an Australian wholesale vehicle) is decided with Japanese and Australian counsel before any document goes to anyone.

What the sponsor earns, and does not put in

• A closing fee of about 3 percent of the deal, paid out of the deal.
• 20 percent of the gain on exit, after investors have made 8 percent a year.
• A small stake in the business for putting it together, earned, not bought.
• The sponsor does not put in a cheque of his own. His interest is the deal closing well and the business doing well, not protecting his own stake. You see all of this in the memo before you commit. No management fee on money that is not working.

How it works in practice

Written, not pitched. You get a Sponsor Memo for each deal: the business, the numbers, the operator, the structure, the risks. You reply in writing with the amount you would put in. When enough of the equity is spoken for, the operator sends the formal documents. One call at the commitment stage if you want one.

Who this is for

Wholesale investors only. In Australia that means the sophisticated or professional investor tests. In other countries, the equivalent. If you are not sure, you are probably not, and the newsletter is still free.

Join the circle

Tell us your range, the sectors you like, and whether you would ever run one yourself. No commitment, no money taken here. You will see the first memo before anyone outside the circle.