Video #9 - Ripplewood Holdings: Looking for Business Bargains
Monday, January 09, 2006BACKGROUND INFORMATION
Ripplewood Holdings is a New York-based private equity company operating in Japan. It manages over $3 billion of equity capital and has offices in New York and Tokyo, staffed by 40 professionals. The company makes investments in promising firms, actively participates in management and obtains capital gains by raising corporate value, thus returning gains back to investors such as financial institutions and pension funds. In Japan, Ripplewood is already in the process of revitalizing the former Long-Term Credit Bank of Japan (currently Shinsei Bank) and it intends to invest approximately $1.2 billion of equity capital by 2004.
"In Japan everything continues for as long as it can continue," says Akio Mikuni, president of a credit-rating company. "Most people don't get excited when they see 'changes' taking place, because usually we end up disappointed." According to Tim Larimer, reporting for Time Asia, "Indeed, there are still structural impediments to a dramatic overhaul of Japan's corporations. Accounting systems aren't transparent, bankruptcy laws are inadequate, the judicial process is slow. And, astonishing as it may sound, Japan simply doesn't have enough accountants or lawyers to cope with massive corporate restructuring." Therefore, foreigners must be the ones to implement the needed changes.
On a visit to Japan in November of 1999, General Electric Corporation chairman, Jack Welch, whose GE Capital is one of the Ripplewood investors, stated on this issue: "Its an abuse of management rights to try to keep a weak business going in the name of lifetime employment. It's better for the employees to leave the weak business and have it merged with a stronger company." (Contrast that with the long tradition of "keiretsu").
About Ripplewood's acquisition of Japan's Long Term Credit Bank, Arthur M. Mitchell of Coudert Brothers LLP writes that it: "...has been widely interpreted as a sign that Japanese officials finally recognize that revitalizing their nation's troubled banking system and the economy it fuels requires a full-embrace of long-shunned foreign financial techniques...(But) given the constraints Ripplewood is reported to have agreed to work under, its efforts may only succeed in cleaning up problems from the past and leave the real challenges of the future untackled."
Experts forecast that allowing Ripplewood to buy the recently nationalized LTCB will unleash competitive forces needed to ensure that true reforms in the Japanese financial system. Mitchell adds that: "Turning to foreigners here means that the government wants to put the heat on the nation's banks to ensure that the overly cozy, personal relationship-based business culture will come under assault." As a financial investor, Ripplewood Holdings only needs to buy assets at low price, restructure them and then sell at a higher price. Nevertheless, Mr. Mitchell adds: "...its unprecedented entry into the Japanese market will allow Ripplewood to become a major innovator if it chooses to do so."
SOURCES:
"CART - Atkinson Joins Board of Directors," RaceWire, October 1, 2001. http://www.racewire.com/article/4/2076 "Nippon Columbia, Ripplewood and Hitachi Agree on Financial and Operational Revitalization plan for Nippon Columbia," Hitachi Global, May 9, 2001. http://global.hitachi.com/New/cnews/E/2001/0509/ Larimer, Tim, "Great News: No More Jobs for Life," Time Asia, November 1. 1999. http://www.time.com/time/asia/magazine/99/1101/japan.nissan.html Mitchell, Arthur M., "Whither Ripplewood's Japan Strategy?" Coudert Brothers LLP. http://www.coudert.com/practice/ripplewoods.htm
LESSON PLAN
GRADE LEVEL/SUBJECT:
10-12/Economics, International Relations, World History, International Baccalaureate Programs (IB), Current Events, Geography
PURPOSE:
To present activities to be used in a variety of classroom situations in order to enhance student understanding of the Japanese economy and its significance globally.
OBJECTIVES:
Students will be able to:
- Describe traditional Japanese corporate practices.
- Describe U.S. corporate practices.
- Compare and contrast corporate practices in Japan with those of the U.S..
- Evaluate changes which have occurred recently in Japanese corporate culture.
- Analyze the effect of current changes in the future of Japanese business practices.
- Evaluate the effect of foreign investors in the future of the Japanese economy.
MATERIALS:
- Background information provided.
- Resources on Japan available at your school's Media Center and the Public Library System in your area.
- Background information available through Internet "search engines."
ACTIVITIES:
- Create a prospectus describing Ripplewood Holdings.
- Construct a Venn diagram comparing Ripplewood's business practices with that of traditional Japanese corporations.
- Write an editorial expressing your opinion on the effect of foreign capital in the current Japanese economy.
- Role play a corporate meeting including Ripplewood representatives buying out a Japanese corporation and the long standing board members of that corporation. Demonstrate the different mentalities and the economic realities relevant to the occasion.
- Create a scenario depicting the effect of foreign capital in revamping the Japanese economy by the year 2025.
EVALUATION:
Individual assignments should be graded by the teacher using established criteria.
Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale:
Content Creativity Clarity
1 = Superior (A) 2 = Excellent (B) 3 = Good (C) 4 = Fair (D) 5 = Poor (F)
To print this lesson plan: If your browser does not print frames, try this -- click the right button on your mouse and select "Open Frame In New Window." Then use your browser's print function to print that page. Another option -- choose "Select All" from your browser's pull-down Edit menu. "Copy" the highlighted text and then "Paste" it into any text editor. You can then print it from the text editor.
