Visitors to the Tokyo Stock Exchange look at stock figures in Tokyo (Photographer: Andy Rain/Bloomberg News)

Nomura Sees Strong Year in M&A, Fueled by Equity Finance

(Bloomberg) -- Nomura Holdings Inc. is confident of another bumper year advising on Japanese mergers after topping the rankings for the first time since 2011.

Japan’s buoyant stock market makes it a good time for companies to fund acquisitions by selling shares, playing to Nomura’s strengths in equity underwriting, said Minoru Shinohara, global head of investment banking. “M&A will be the key driver for equity offerings because that will be a good story to tell investors,” he said in an interview in Tokyo.

Nomura’s resurgence in mergers advice last year was aided by large international deals including Toshiba Corp.’s $18 billion memory-chip unit sale. Japan’s biggest brokerage has lagged behind global rivals on cross-border transactions in recent years, a trend that Chief Executive Officer Koji Nagai is trying to reverse by bolstering the firm’s advisory capabilities in the U.S. 

Nagai said in an interview last month that he’s open to hiring entire teams of investment bankers in the Americas or even making acquisitions of his own.

Nomura beat Goldman Sachs Group Inc. to the No. 1 spot in 2017 in large part due to deals involving buyout firms, according to data compiled by Bloomberg. It advised Toshiba on the sale of its memory chip business to a consortium led by Bain Capital and helped Hitachi Ltd. offload a unit to KKR & Co. for $1.6 billion. 

AdviserDeal Value ($ Billions)
2Goldman Sachs35.3
3Morgan Stanley-Mitsubishi UFJ34.9

Shinohara expects more Japanese companies to sell non-core businesses and private equity firms to shop for further deals after spending a record amount on acquisitions in the country in 2017. “Japanese companies will continue to concentrate their operations, and funds are getting more powerful,” the 56-year-old banker said.

Shinohara, who took the post last April, sees transactions in Japan’s equity capital market expanding this year as stocks rally and technology and drug companies tap investors to make large acquisitions. Japan’s biggest brokerage was the country’s No. 1 manager of equity and equity-linked offerings for the 16th straight year in 2017, data compiled by Bloomberg show. The value of all transactions almost doubled from a year earlier, according to the data.

Buyout Boom

Bain Capital’s Japan chief, Yuji Sugimoto, said in a separate interview that the banner year for buyouts won’t be a one-off, as Japanese companies will need to turn to deep-pocketed partners to revive or shed failing business units.

“We’ll see more and more examples of companies forming partnerships with private equity firms,” Sugimoto said.

The importance of such firms is likely to grow, according to Shinohara. 

Recognition of financial sponsors in Japan has totally changed from 10 years ago,” he said. “We won’t be able to advise on this type of deal without knowing both the targets and acquirers.”

©2018 Bloomberg L.P.