00:00We have seen an immense change in markets, in the macroeconomic backdrop, in geopolitics as well.
00:06And as I mentioned, yields now at record highs. Does that change the playbook for your business here?
00:12Well, first of all, geopolitical risk has been there for some time already.
00:20And we are closely watching what's going on in the world. And regarding Iran war, that, of course, impacts the
00:37procurement costs for Japanese companies in Japan.
00:43But so far, we are monitoring our portfolio companies. And a negative impact on those portfolio companies is still minimal.
00:53So we hope the company will continue to manage the procurement costs.
01:00But that's the current situation in terms of Iran war impact.
01:06In terms of the rate, yeah, BOJ will normalize the rate so as to be able to control inflation rate
01:18better, under control.
01:25But the base rate itself is still low and quite competitive in comparison to base rate in the U.S.
01:33and Europe.
01:33So we still have we still enjoy quite competitive financing costs in terms of availability and cost wise.
01:48The trajectory, though, seems to be higher, especially for BOJ rates, right?
01:52And at the same time, we don't know when the Iran war will end and if those procurement costs will
01:56just worsen from here.
01:58Does worsening sentiment also risk impacting corporate activity overall?
02:03Well, it depends.
02:05Well, it depends.
02:05It depends upon how interest rate goes higher.
02:12But our estimate is probably rate increase twice a year, twice this year by BOJ, by 25 basis points each,
02:26meaning 50 basis points increase doesn't matter for private equity investment.
02:33So we see an increasing rate, but that itself will not have substantial impact on overall corporate activities as well
02:45as for private equity investment.
02:47That's what that's how we see.
02:48And so far, you've had a very busy year for Karla.
02:52Yes.
02:54Yes.
02:54I remember I met you last May over the last one year, we have five new deals and four exit
03:06transactions.
03:07Five new deals include two curve out deals and three take private deals, which is exactly in line with the
03:18current market trend.
03:19More curve out from corporations is taking place.
03:24So that Japanese CEOs are more focusing upon core businesses for creating the growth and divesting non core businesses.
03:35And that's why we have more curve out type of deals.
03:41And when we talk about curve out, there are two types.
03:46One is acquisition of subsidiary companies equity.
03:50The second type is acquisition of business asset from corporation.
03:56One of the deals which we have signed is electric component business curve out from Omron Corporation.
04:05That is business curve out, not just subsidiary acquisition.
04:11And that type of curve out should be enhancing in Japanese market.
04:18Since Karla has done a lot of business curve out transactions in the U.S., probably one of the most
04:26deals done by Karla.
04:29OK, so that's maybe your competitive edge.
04:32But at the same time, are there some concerns about the risks around perhaps sentiment changing in Japan?
04:38If you're seeing the Japanese government stepping in, for example, the NBK partners really wanting to buy what is a
04:44Makino milling and the government saying is a national security concern.
04:48Yeah. Well, the protecting economic security by the government is just a reasonable thing to be done.
05:06And that's happening not only in Japan, but also in other countries for some time already.
05:14The important thing is we have to be carefully targeting the target company, especially in the core sector of industry.
05:27And examine if this investment target can be protected by the government or not well in advance before working on
05:39the transactions.
05:41That way, the seller and the buyer doesn't have to waste the time.
05:47So I think that is a given circumstance. And what we should do is targeting.
05:54For the living!
05:54That's what I think!
05:54That's a good idea for you!
05:54Thank you!
05:54We want to give you a brief overview of how we can make it like a
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