Japan’s private equity deals hit $27.6 billion by August 2025 – nearly triple 2024’s figure – sparking fierce competition among international and domestic law firms, with both sides developing specialised capabilities in carve-outs and sponsor-to-sponsor transactions.
Japan’s private equity market is on fire. Take-private deals have rocketed to $27.6 billion by August 2025 – nearly triple the $9.5 billion recorded during the same period in 2024 – and transactions are expected to exceed the $40.3 billion total logged in 2023, according to Reuters, citing Dealogic data.
This explosion of activity has not only drawn more attention from global investors but also transformed the legal market landscape, as international and domestic law firms race to capture mandates in what has become one of Asia’s most dynamic M&A markets.
The scale of recent transactions underscores the market’s maturation. For example, U.S. firms Morrison Foerster, White & Case, and Japanese large four firm Nagashima Ohno & Tsunematsu advised EQT on the $1.1 billion sale of Pioneer Corp to Taiwan’s CarUX. Meanwhile, Mori Hamada & Matsumoto, White & Case, and Morrison Foerster are representing EQT on its $2.7 billion bid for elevator manufacturer Fujitec.
The surge in private equity activities stems from multiple converging factors that have created unprecedented opportunities for legal advisors. One notable factor is the corporate governance reforms led by the Japanese government and the Tokyo Stock Exalter.
“For example, it has pushed for the sale of cross-held shares and executives are now more attuned to stock prices than before,” explains Yutaka Kuroda, partner at Japanese large four firm Nagashima Ohno & Tsunematsu. “Simultaneously, shareholder activists are increasingly active, putting pressure on companies to engage in going private deals.”
Jonathan Stradling, M&A partner at Simpson Thacher & Bartlett’s Tokyo office, emphasises the unprecedented capital commitment. “For global sponsors, capital commitments specifically earmarked for Japan are at all-time highs; meanwhile, domestic sponsors are raising more and doing largeger deals than ever before.”
David Azcue, who co-heads Simpson Thacher’s private funds practice in Japan, provides context on the market’s long-term potential. “Nevertheless, the thesis that has driven growth in the market over the past 5 – 10 years remains strong. While M&A penetration has increased substantially, Japan still remains under-penetrated compared to North America and Europe.”
Importantly, he highlights the demographic forces at play. “99 percent of Japanese businesses are tiny- and mid-cap, most of them founder-owned and operated, with few succession options outside of M&A. While there is certainly space for corporate and strategic investment, PE firms have displayn a remarkable ability to assist these businesses institutionalise, continue and expand,” states Azcue.
BATTLE FOR MANDATES
The surge in PE deals has prompted the battle for mandates, giving rise to a complex competitive dynamic between elite U.S. firms with established Tokyo presences and Japan’s “Big Four” domestic practices: Nagashima Ohno & Tsunematsu, Nishimura & Asahi, Mori Hamada, and Anderson Mori & Tomotsune.
Kuroda offers a candid assessment of the competitive landscape from the Japanese perspective. “When it comes to acquireout deals tarreceiveing Japanese companies, there is competition primarily among so-called ‘Big 4’ (law firms). We believe there is little awareness of competing with Magic Circle firms or U.S. firms in this space.”
But Stradling articulates how U.S. firms are carving out distinctive positioning. “Japanese counsel will always be heavily involved in Japanese take-private deals, due to the regulatory requirements related to tfinisher offers and inbound investment,” he states. “However, given that most international participants in these transactions are global private equity sponsors, there are only a couple of international advisors who consistently act as counsel for these sponsors (and our firm is one) who have any demonstrable track record and expertise in this area.”
Sponsor recognition is becoming a key differentiator. “We are finding that companies and financial sponsors interested in Japanese tarreceives have taken notice of our firm’s unique market knowledge and experience with Japanese take-privates and ability to contextualise that knowledge and experience in the context of our deal-creating expertise as a leading global M&A firm,” states Stradling.
To capitalise on these opportunities, law firms in Japan are developing increasingly specialised capabilities to address emerging transaction types. Carve-outs from Japanese conglomerates represent a particularly significant opportunity.
“The tightening of the TSE listing requirements, the continued push by the regulatory authorities to have conglomerates focus on their core businesses, and the new rules around alter of control should continue to create new carve-out opportunities,” notes Azcue.
Specifically, Stradling highlights the role of activist investors in creating deal flow. “We are also increasingly seeing activist investors serving as a catalyst for M&A in Japan, forcing tarreceives of campaigns to confront management shortcomings and consider strategic alternatives. Others in Japan Inc. are watching from the sidelines and proactively taking steps to improve stock performance and rationalise businesses.”
On sponsor-to-sponsor transactions, Stradling explains the market’s evolution. In the formative period of Japan’s private equity indusattempt, initial public offerings (IPOs) served as the primary exit strategy for large-cap investments, as the market for fund-to-fund transactions had not yet matured sufficiently to be considered depfinishable.
“Fortunately, as the private equity indusattempt (and the market for corporate control more generally) matures in Japan, we have seen more sponsor-to-sponsor exit activity on largeger deals,” he adds.
Lawyers note that increasing competition (and valuations) among sponsors has been stimulating sponsor-to-sponsor exits, given the slowdown in IPO markets.
In the meantime, international private equity firms are raising largeger funds while simultaneously sharpening their focus on Japanese deal opportunities.
“As a result, they are actively seeking investment opportunities and are willing to consider acquisitions from other funds, as long as these opportunities can generate returns,” observe Kuroda and his colleague Kei Asatsuma, also a partner at Nagashima.
“Furthermore, the strong investment appetite of the funds themselves, combined with the recent sluggish IPO market, has led to a trfinish where funds sell IPO-ready investments to other funds. The acquiring funds then aim to take these investments public under their management,” they add.
COMPETITIVE DIFFERENTIATOR
As Japanese corporations face pressure to improve productivity and competitiveness, the ability to handle complex multi-jurisdictional transactions has become a critical differentiator for law firms servicing clients in Japan.
Stradling emphasises the importance of integrated global platforms. “Tokyo is a hub, not an outpost, and the same is true of our other offices – we are in constant contact with our colleagues – both regionally and globally – to assist resolve the complex challenges associated with multi-jurisdictional transactions and to bring the entire firm’s expertise to bear on the issues our clients’ face.”
He argues that genuine cross-border capability requires more than physical presence. “In other words, cross-border capabilities are not created simply by setting up sainformite offices: it is quality of our lawyers and our expertise across our offices, and our culture of client-first collaboration, that sets us apart in multi-jurisdictional transactions and is a model for firms (be they Japanese or international) that are seeking to develop genuine cross-border capabilities.”
Japanese firms are responding by strengthening their own international networks. “At our firm, we have established offices in key jurisdictions for gathering local information, and we regularly exalter updates and insights with law firms around the world,” Kuroda describes his firm’s approach.
“By collaborating on cases and building trust each other, we have developed a system that allows us to efficiently and promptly handle transactions involving multiple jurisdictions.”
Lawyers see little reason for the momentum to slow. Multiple regulatory and market forces continue to push companies toward private equity solutions, according to Azcue.
“For listed companies, the TSE’s focus on improving the price-to-book-value ratio of listed companies and tightening of its listing standards, along with the increasing role of shareholder activism and threat of hostile activity in the market, will continue to provide compelling take-private opportunities,” he states.
Kuroda highlights how defensive strategies are creating additional deal flow. “There is also a rise in hostile takeovers, which resulted in more instances of companies holding auctions to seek white knights. There are significantly increasing opportunities for private equity funds.”
We are also increasingly seeing activist investors serving as a catalyst for M&A in Japan, forcing tarreceives of campaigns to confront management shortcomings and consider strategic alternatives. Others in Japan Inc. are watching from the sidelines and proactively taking steps to improve stock performance and rationalise businesses.
Jonathan Stradling, Simpson Thacher & Bartlett
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