Blackstone expects most Asia deal activity in Japan and India in 2024

By Lisa Du and Takako Taniguchi

Blackstone Inc. expects India and Japan to be its most active markets in Asia next year based on capital allocation, according to the firm’s head of private equity. 
 

“India has the highest growth; it also has the most ebullient stock market,” Joe Baratta, Blackstone’s global head of private equity, said in an interview in Tokyo. “Japan will also be very interesting as a market. The economy seems to be decoupled from what’s going on in the rest of the world.” 

The world’s largest alternative asset manager has been active in India, where it recently acquired a stake in two hospital chains. But it’s been relatively quiet when it comes to private equity deals in Japan in the past two years, despite broader foreign investor interest in the island nation.

Blackstone would be open to do deals in Japan that are anywhere from $300 million to more than $2 billion, and in sectors like IT, healthcare and consumer, Baratta said. He added that it has transactions in the consumer and industrial sector in the pipeline. 

Baratta was in Tokyo to meet with Blackstone’s private equity executives across Asia, where they were discussing strategy and meeting with global investors who had flown in.

The New York-based firm’s only two private equity portfolio companies in Japan are Ayumi Pharmaceutical Corp. and Alinamin Pharmaceutical Co., which was the former consumer healthcare unit of Takeda Pharmaceutical Co. It bought the latter in a 242 billion ($1.6 billion) deal. Talks for Blackstone to join the buyout of Toshiba Corp. as an equity investor were stalled earlier this year.

It’s been a difficult time for the private equity industry, as dealmaking has dried up with high interest rates, banks becoming more hesitant to lend, and volatile markets. Last month, Blackstone reported a 12% decline in quarterly profit available to shareholders. 

Still, Baratta said the company’s private equity pipeline is more robust right now than at any time since Blackstone pulled back on dealmaking in mid-2021, when inflation started becoming a concern. The firm finished raising an $11 billion Asia buyout fund in January 2022. 

Japan has been one of the last holdouts among developed economies when it comes to rock-bottom rates, although that might soon change after the central bank signaled last week that it was easing its grip on long-term yields. But Baratta said the Bank of Japan’s policy did not impact the firm’s decision making on investments. 

“The cost of financing doesn’t represent a large component of the return that we’re generating in private equity,” he said. “Japan is as interesting as it’s ever been, notwithstanding changes in BOJ policy that may portend higher interest rates.”

The weak yen — which has fallen more than 20% against the dollar in the past two years on the interest rate differential between the US and Japan — does provide a potential allure for Blackstone. “It may make us feel generally better about investing in a moment in time versus not,” Baratta said.