Blackstone Anticipates Increased Deal Activity in Japan and India for 2024

06 Nov, 2023

Blackstone Anticipates Increased Deal Activity in Japan and India for 2024

Blackstone Inc., the world's largest alternative asset manager, is projecting India and Japan to be its most active markets in Asia in the coming year, driven by strategic capital allocation. Joe Baratta, Blackstone's global head of private equity, highlighted the potential of these markets during an interview in Tokyo.

Baratta emphasized India's remarkable growth trajectory, noting that it boasts one of the most vibrant stock markets globally. He also underscored Japan's resilience, stating, "Japan will also be very interesting as a market. The economy appears disconnected from global trends.”

While Blackstone has been actively investing in India, recently acquiring a stake in two hospital chains, it has been relatively reserved in terms of private equity deals in Japan over the past two years. However, Baratta expressed the firm's openness to pursue deals in Japan across various sectors, with deal sizes ranging from $300 million to over $2 billion. The sectors of interest include IT, healthcare, and consumer, and Blackstone has transactions in the consumer and industrial sector in its pipeline.

Baratta's visit to Tokyo included meetings with Blackstone's private equity executives across Asia, where they discussed strategies and engaged with global investors who had gathered for discussions.

Blackstone's current private equity portfolio in Japan comprises Ayumi Pharmaceutical Corp. and Alinamin Pharmaceutical Co., formerly the consumer healthcare unit of Takeda Pharmaceutical Co., acquired in a deal valued at ¥242 billion ($1.6 billion). Nevertheless, talks for Blackstone's participation as an equity investor in the Toshiba Corp. buyout were halted earlier this year.

The private equity industry has faced challenges recently, with deal activity affected by high interest rates, increased caution in lending by banks, and market volatility. Despite this, Baratta expressed confidence in Blackstone's private equity pipeline, noting that it is more robust now than at any point since the firm scaled back dealmaking in mid-2021 when inflation became a concern. In January 2022, Blackstone successfully raised an $11 billion Asia buyout fund.

While Japan has been one of the few developed economies to maintain low interest rates, recent signals from the central bank indicate a potential shift. Nevertheless, Baratta stated that the Bank of Japan's policy changes do not significantly impact Blackstone's investment decisions.He elaborated, saying, "The financing costs play a relatively minor role in our private equity returns. Japan remains as intriguing as ever, even considering potential shifts in BOJ policy that could indicate higher interest rates.

The depreciation of the yen, falling by over 20% against the dollar in the past two years due to the interest rate gap between the US and Japan, presents an attractive opportunity for Blackstone. Baratta acknowledged that the weakening yen may make the firm more inclined to invest in the region.