Tim Collins has just wrapped up his monthly three-day stint in Japan. After round-the-clock meetings, he sounds tired but pleased. "Something extraordinary happened," he says, then adds with a chuckle, "but I can't tell you about it for at least another month."
If history is any guide, the news will probably be yet another multimillion-dollar acquisition that will throw the spotlight once again on the 45-year-old Kentuckian and the company he named after his grandma's tobacco farm. Ripplewood Holdings may be little known in the U.S., but the private-equity firm, based in New York City, is virtually a household name in Japan, thanks to a $2.5 billion shopping spree in which it has grabbed national jewels, including a bank, a golf resort and a record label. The current deal may or may not involve KDDI, the Japanese phone giant Ripplewood is reportedly negotiating with for purchase of its wireless units. In any case it's bound to raise another round of hysterical cries about a foreign invasion--a nice irony for those who remember when Japan's corporate invaders were feared. But the real question is this: Can Ripplewood do what Japan Inc. could not and turn these loser companies around?
On the face of it, the odds don't look good. In Japan "restructuring" often means ordering just enough layoffs and cost cuts to qualify for another lifeline from the banks--themselves staggering under $1 trillion in lousy debts. Meanwhile, the corporate graveyard is crowded with foreign investors who tried to make over Japanese failures. Most recently, Merrill Lynch, which bought out securities firm Yamaichi, is beating a retreat.
That's not to say Japan doesn't look like a buy. Foreign investments in the country surged 32% to $28 billion in the fiscal year ending last March, according to just-released government figures. In 2001 foreigners accounted for almost a third of the mergers and acquisitions, says Thomson Financial, up from only 13% the year before. GE Capital, investor Wilbur Ross and the private-equity arms of firms such as J.P. Morgan are committing billions of dollars. "Despite all the uncertainties, there comes a point where you just can't ignore the opportunities here," says John Lewis, a partner at J.P. Morgan in Tokyo.
Yet no firm inspires public outrage like $4 billion Ripplewood, thanks largely to its taste for companies that evoke Japanese national pride. Ripplewood in 1999 became the first foreign firm to buy out a Japanese bank--Long-Term Credit Bank, the fifth largest. Last year it snapped up the largest share in--and effective control of--Nippon Columbia, the 92-year-old record label whose name is synonymous with enka (Japanese folk ballads). Then Ripplewood bought out Seagaia, a sprawling golf and beach resort on the southern island of Kyushu that plays host to Japan's best-known golf tournament. Ripplewood also purchased Niles Parts, an auto-parts maker.