- Evolving Investment Opportunities
- Advantage Partners, Inc.
Mr. Sasanuma founded Advantage Partners in 1992 with Mr. Folsom. Previously, he helped to open and was the senior Japanese manager of the Tokyo office of Cambridge-based Monitor Company. He also has significant management consulting experience with Bain & Company Japan Inc. . Prior to that, he worked for several years with Sekisui Chemical Corporation in Sales, Human Resources, Corporate Planning, and New Business Development. Mr. Sasanuma received his BS and MBA degree from Keio University and also holds an MPA degree from the John F. Kennedy School at Harvard University.
- We will always have the highest feelings of respect for our clients and provide them with the highest level of added value.
- We provide the highest quality work based on global standards.
- We will always take the initiative in our thinking and actions. Each of us will proactively utilize our intelligence, execution capability and persistence to solve problems.
- We do not consider innate characteristics such as race, gender, age, or educational/occupational background as criteria for performance evaluation, promotion, compensation or providing increased responsibilities and opportunities.
Advantage Partners views our philosophy as the following: “To nurture our portfolio companies into entities that are sufficiently competitive to realize self-sustained growth even after our exit.” “To manage and implement our investment process and subsequent management process so that, over the course of our investment, value will be created not only for our investors but also for all involved parties including other shareholders, employees, their families, business partners and financial institution.” This philosophy is shared not only with our employees but also with the management of our portfolio companies. We believe it is very important to be open about what our investment approach is and we make a point of reading our operating philosophy to potential investee company management when we first meet with them. We normally acquire the majority of the equity in our portfolio companies which allows us to deeply involve ourselves in the company’s management in order to increase corporate value. Our basic investment style is to then create economic value for our stakeholders by selling our portfolio companies to new owners or listing their shares publicly, which allows the companies to realize their next stage of growth.
On average, the profits of our portfolio companies are growing faster than those of publicly listed companies. This begs the question: "How are companies that private equity funds invest in different from listed companies?" My answer is that they primarily differ in their corporate governance. Advantage Partners goes into each of our portfolio companies and builds on the controls that the previous shareholders established by clarifying the company's operating philosophy and goals, and by supporting concrete improvements in the company's strategic planning, organizational, and operational functions. Additionally, we also provide support for the company's public-facing functions such as communication with mass media, the use of social networking tools, and compliance with relevant regulations. Advantage Partners has a robust bench of core members who bring a formidable set of executive management capabilities to our firm due to their background as alumni of consulting firms (I also have a consulting background) and financial institutions, and as lawyers and accountants. We believe that by utilizing our teams’ extensive experience to thoroughly enforce corporate governance at the companies in our portfolio, we can realize a tangible improvement in operating performance, and as a result, corporate value. Advantage Partners primarily invests in mid-market companies with an enterprise value between 3 and 30 billion yen. We have invested in a broad range of industries including food & beverage, consumer goods, retail, manufacturing, wholesale, IT, media and entertainment, healthcare, telecommunications, and financial services. For companies that have already achieved a certain level of sales and cash flow we make investments based spurring growth, while also making turnaround investments to rebuild companies which were managed poorly. In recent years, we have been seeing deal flow from companies that are looking to divest divisions or subsidiaries, and from founder/owners who do not have succession plans.
In 1992, I founded Advantage Partners with my American partner, Richard Folsom. After founding the company, we worked on a several business projects before launching Japan's first buyout fund in 1997 with JPY 3 billion. Since at the time we launched our first fund there was no understanding of (or even terminology in Japanese for) concepts such as private equity, management buyouts, or leveraged buyouts, we had a very difficult time raising funds. However, we believed that since the "megabank" system of Japan was on the cusp of a dramatic change there would be a heightened need for risky capital like that which private equity funds could provide. After these anticipated changes to the banking system were realized, we launched our first fund with the desire to create a new value-adding financial market.
Advantage Partners guiding principle is what we call the Advantage Way.
The core tenant of the advantage way is: "Advantage Partners constantly creates new markets and redefines existing markets in innovate ways. We continually achieve leadership in the markets that we enter into, and share the increased economic value that we add through that leadership with our collaborators, employees, as well as with general society." Additionally, we have 4 statements that support this core tenant:
Richard and I put these principles into writing and shared them with our staff after an incident occurred several years after we had founded the company. One of our employees spoke in passing to a business partner in a way that we felt was unbecoming of what we stood for. After this incident, Richard and I had a long discussion about how to approach our corporate culture and philosophy, and the result was the Advantage Way.
We stand by these same principles which have remained unchanged since they were first drafted. Since we announced this philosophy to all our employees, I believe that our staff’s mutual respect towards all our partners has increased and we have become a more unified organization.
Of the 60 investments that Advantage Partners-related funds have made since our founding, we have exited 40 of them. Regrettably, included in these exited investments are several which performed far below our expectations. Even including these investments, however, our track record shows us having achieved a total return of over 2x. The primary source of our returns is from an increase in profits at our portfolio companies which we believe is due to our ability as shareholders to work with company management and staff to implement effective measures to stimulate growth.
Although they are orthodox recommendations, I would suggest reading Michael Porter's "Competitive Strategy" and "Competitive Advantage". Although these books are not specifically related to financial investments, they are exceedingly useful for understanding the environment and structures that companies operate in, and how to design and control management operations from an economic viewpoint. I find myself often referring to these two books when I am confronted with making an investment decision or when we are implementing changes at a portfolio company.
For daily information collection, I check the Nikkei Shimbun, the Yomiuri Shimbun, Mainichi Shimbun, the domestic section of the Sankei Shimbun, and for overseas media I check the Financial Times and the Wall Street Journal. For magazines, I read the Nikkei Business, the Nikkei Veritas, Shukan Diamond, and Shukan Toyo Keizai for a broad range of economic topics not limited to finance. I also read online publications such as AVCJ and Mergermarket for information on M&A.
This article originally appeared on Feb 7, 2018. Any views presented in this article are as of such date and are subject to change.
This article and the information provided therein are not a recommendation to purchase or sell any security, nor are they intended to constitute the marketing of, or a solicitation for investment in, any investment product.
Advantage Partners is a leading provider of services to private equity and similar funds focused on the Japanese and Asian markets. Advantage Partners was founded in 1992 by Taisuke Sasanuma and Richard Folsom and has been providing services to funds since 1997, when the firm established the first buyout fund in Japan. Funds served by Advantage Partners have invested in more than 60 companies representing total invested capital of over JPY350 billion across a wide range of industries and sectors. Advantage Partners has offices in Tokyo, Hong Kong, Shanghai and in Singapore.
（Pease see the interview.）
February 7, 2018
by Investment in Japan