When hunting for a company to buy out, Kenji Ueda doesn't wait to be introduced. The Ripplewood Holdings LLC executive director makes his phone calls cold.

Shoppers stroll by a Nagasakiya outlet in a shopping center in Tokyo.

At the other end of the line is an executive who could lose his job if his company agrees to the proposals Ueda pitches. But his reception is usually surprisingly cordial.

"Nine out of 10 times, I can get people to agree to meet with me. And the 10th isn't offended. It's usually just someone who has never heard of Ripplewood," Ueda said. "People are still reluctant to deal. But they are coming to the table."

Private equity funds are changing business where Japanese banks have given up. By gaining majority shareholder status in distressed or undervalued companies, these funds impose foreign business practices and disrupt existing business relations in sectors that have been most shielded from market pressures.

That is why names like Ripplewood, Cerberus, Lone Star Fund and Asia Recovery Fund have earned a little infamy on top of their slightly dubious image. It is also why they are inspiring respect and not a little hope in Japan's stagnant economy.

Foreign private equity funds, many of which are American, have raised an estimated 1.1 trillion yen for investment in Japanese projects to date.

For all the promise, however, it remains to be seen whether private equity funds will succeed in rehabilitating troubled firms.

Differing business norms between the funds and firms they acquire and legal uncertainties about buyouts make the road to restructuring a bumpy one.

Private equity funds invest in undervalued companies, compress liabilities, restructure management and then exit with a profit by going public or selling held stocks at a higher price.

Some, like Ripplewood, focus further on companies that have suffered from poor management. These funds send in a team of representatives to sit in on board meetings and to look out for the interest of the fund by making sure the firm sticks with the agreed upon restructuring plan.

They are smoothing out their niche precisely because the conventional Japanese method of relying on a friendly banker or an understanding parent company to ride out losses is becoming unreliable.

"The main bank system no longer works," said Seichiro Boda, risk management adviser at UBS AG's Tokyo branch.

Private equity funds first gained the spotlight when Ripplewood acquired the failed and nationalized Long-Term Credit Bank of Japan. After its rebirth under new management in March 2000, the reincarnation, Shinsei Bank, promptly adopted Western-style lending practices, cutting off support to shaky borrowers and angering rival Japanese banks.

"Our lending practice reflects our true assessment of credit risk," said Eiji Otaka, deputy director general of Shinsei Bank's corporate communications department. "This ought to be the case at all banks."

Ripplewood's list of high-profile acquisitions has grown to include Nippon Columbia Co., a music software and audiovisual appliance manufacturer, Phoenix Resort, Ltd., operator of the failed Seagaia resort complex in Miyazaki Prefecture, and automobile electronics parts maker Niles Parts Co., a former subsidiary of Nissan Motor Co.

Ripplewood acquired Seagaia with an initial investment of 16.2 billion yen after consolidating its liabilities. Ripplewood flew in 60 professional managers specializing in everything from pipe maintenance to supply orders to look at the resort's 99-hole golf course and domed pool.

All the poking around has caused a little anxiety among local businesses who fear one of their largest customers may look elsewhere to get supplies.

But Ripplewood appears to be looking at the big picture. Ideas being kicked around so far include creating a casino and turning the resort into a health spa where people from Japan and Taiwan can get medical checkups or plastic surgery while relaxing for a week at the resort.

For Tokyo-based Niles Parts Co., Ripplewood's presence has meant a complete turnaround in its decision-making, said Tadao Akiyama, Niles' managing director.

Decisions are now made during monthly workshop meetings in four areas: finance, sales, production and overall strategy -- all headed by Ripplewood representatives -- including former General Motors Vice President Richard Donnelly.

The teams decided earlier this month to close Niles' Tamatsukuri factory in Ibaraki Prefecture, where 150 people work, and to outsource production of relays to a factory in South Korea.

By next March, Niles hopes to reduce its workforce by 200 people to 1,200 and return to the black.

"The decision would have taken much longer under the former management," Akiyama said, referring to a system in which most managers were former technicians and extremely close to the employees. "There would have been too many concerns, and employees would have felt a greater sense of betrayal by management."

Even without sending in representatives, private equity funds can usher in change -- and friction.

Cerberus, for instance, has a size and profile in the U.S. that dwarfs Ripplewood but has refrained from hands-on management, opting instead to focus on consolidating liabilities and freeing profits.

But its presence as a sponsor in the rehabilitation of retailer Nagasakiya, which filed for court protection with 380 billion yen in liabilities last year, still causes consternation.

In May, Cerberus pressed management for a more drastic restructuring plan, clashing with Nagasakiya's main creditor, Dai-Ichi Kangyo Bank, and delaying submission by five months to November.

Cerberus and DKB are still arguing over which side should shoulder the higher-than-expected operating costs, raising fears that the rehabilitation of Nagasakiya could be scrapped.

The deal-making process itself inspires change, said Yoshitaka Kono, who headed the joint buyout of Nissan subsidiary Zero Co. by U.S. equity fund AIG Japan Partners Inc., Tokio Marine Capital and Zero's management.

"You wouldn't believe how much is left unsaid and unwritten between subsidiaries and parent companies," Kono said.

"Subsidiaries often don't pay rent on land owned by parent companies, while parent companies get large, unwritten discounts on products.

"Drawing up a new contract that explicitly states what everything is worth is half the battle."

Ripplewood's Ueda still stands by sending in a fund representative.

"It's amazing what a foreign face can do for a company's sense of crisis," he said. "Employees also take things less personally when it's a foreigner speaking."

Foreign or not, professional managers need to tread carefully.

The companies that funds are dealing with are usually somebody's most precious lifework, and there is always strong resistance about decisions made by outside managers and stockholders.

"Most fund managers are in their 30s; and we're negotiating with company presidents in their 50s or 60s," Kono said. "It takes an effort to keep from stepping too hard on people's toes."

Nobuyuki Kinoshita, director of the supervisory coordination division at the Financial Services Agency, also expressed concern.

While saying that equity funds can help problem borrowers and ease the bad-debt problem at Japanese banks, he said he is unsure whether Western management models will work in Japan.

"Will Harvard MBAs be able to do the job?" Kinoshita asked. "Will they be able to work side by side with workers at the ground level?"

And until a fund can make a graceful exit, all are holding their breath, including the most famous buyout funds, such as Warburg Pincus and Blackstone in the U.S., who have not yet made a significant commitment in Japan.

"It could be five to 10 years before we expect to go through with an exit strategy. Until then, it is still too early to tell," Kono said.