Japan's Biggest Motorcycle Retailer Just Got Bought By Bain Capital, Oh Great

Let's say it's your dream to start a motorcycle shop, and through a lot of hard work and determination, you're able to pull it off. That's how the company now known as Red Baron Group first started in Japan, all the way back in 1972.

Originally formed as Yamaha Auto Center in Okazaki City, in the intervening years, it both expanded to over 300 locations nationwide, and also changed its name to Red Baron Group. At the end of 2023, it reported having nearly 2,500 employees among its ranks, throughout its various locations and offices. 

What does Red Baron do, exactly? Everything to do with motorcycles for riders in Japan. Its motto, in fact, is "Just For Riders." For what it's worth, it seems to put its money where its motto is.

It sells new and used motorcycles. It buys used motorcycles from riders, then turns around and sells them on. It also has service centers where you can get your bike taken care of, and it sells and installs parts and accessories. You get the general idea. 

So, in other words, it's kind of a big deal.

But on September 24, Red Baron posted a news notice on its official webpage with an incredibly understated title. Translating to "Notice of Change in Major Shareholder," the post notes that Red Baron Group's parent company, Red Baron Properties Inc., has just signed an agreement to transfer the majority of its shares to Bain Capital Private Equity, LP. 

Furthermore, it notes that this transfer will happen by the end of December 2024, so it's clearly moving fast. Meanwhile, the Red Baron Group's founding family, the Sugiuras, will continue to hold an unspecified number or percentage of shares in the Group. 

The post goes on to underline how Red Baron Group has always strived to put customers first, and that it doesn't expect this stance to change despite the change in ownership. It also goes on to say that it believes Bain Capital's corporate philosophy and management policy are in line with Red Baron's, which is why it made this decision. 

For its part, Nikkei Asia noted that this deal is worth nearly 100 billion yen (approximately US $694 million at the time of writing), and also added that Red Baron Group's current management is expected to stay in place as part of this deal. 

If this isn't your first private equity story-reading rodeo, then yes, it is the same Bain Capital that you probably remember reading about a few years back, when many blamed its leveraged buyout of Toys 'R Us for sending the toy retailer careening into bankruptcy and throwing 33,000 workers out on their butts with zero severance, regardless of how long they'd worked for the company. 

And that's only one of Bain's most recent high-profile controversies. In fact, many of the complaints and bad tastes that the phrase "private equity" leaves in regular people's mouths in 2024 can be credited, for better or for worse, to business maneuvers that originated with Bain Capital. 

But Wait, Isn't Bain Capital A US-Based Company? What's It Doing In Japan?
Here in 2024, private equity is apparently having a bit of a moment in Japan. This is due in large part to multiple factors, says Jessica Seah at Law.com.

The yen is weak compared to many other currencies right now, including the US dollar. And speaking of the US, interest rates have been high lately, as you've probably noticed. So have PE firms. This confluence of factors has made looking further afield for investment opportunities infinitely more attractive.

Add to that the fact that Japan is also facing what Seah terms a "succession crisis," particularly in family-run businesses due to the dovetailing issues of an aging population and a declining birth rate.

There's a lot going on right now, as there usually is if you look deeply at any situation like this. So it's no wonder that Bain and other PE companies might find good reason to take a hard look at potentially lucrative Japanese business opportunities.

What Will This Mean For Riders In Japan?
We can't tell the future, and neither can you. As I've said before about other things, anyone who tells you they can is either lying outright, or trying to sell you something.

And as always, I'll hope for the best, purely for the sake of both Red Baron employees and riders. For that reason, I'm hopeful that Japanese law has sufficient guardrails in place to avoid ugly situations like the one with Toys 'R Us, or the one with KB Toys before that, or the one with American Pad & Paper before that. (There are more, too, but this piece isn't about the history of post-leveraged-buyout Bain Capital-related bankruptcies.)