Nomura Holdings Inc. (8604), Japan’s biggest brokerage, plans to hire about 20 bankers in the U.S., part of efforts to regain lost share of the world’s largest mergers and acquisitions advisory market.
The company will seek people to work on leveraged lending and building relationships with private-equity firms such as KKR & Co., global investment banking head Kentaro Okuda said in an interview in Tokyo. Others will be recruited to cover the hotel, real estate, casino and gaming industries, he said.
The hiring plans mark a shift by Chief Executive Officer Koji Nagai toward resurrecting Nomura’s global ambitions after spending the first 16 months of his tenure fixing his predecessor’s missteps, such as ballooning overseas costs and an insider-trading scandal that roiled domestic operations. The brokerage is expanding in leveraged finance as stricter global capital requirements make the business more expensive for banks.
“We’ve entered the phase where we can think about how to make deals and obtain clients in the Americas,” Okuda, 50, said in the Nov. 28 interview. “There are tons of deals there.”
Nomura is holding a meeting in Tokyo this week to discuss how to work on more acquisitions by Japanese companies abroad as well as boost the domestic advisory business, said Okuda, who became global head of investment banking in September 2012. About 50 bankers and regional heads from around the world are attending the two-day gathering, he said.
“The hiring won’t enable Nomura to compete with its peers in the U.S. because the firm has limited ability to gather information there,” said Masao Muraki, a Tokyo-based analyst at Deutsche Bank AG. “But it will help the company avoid missing out on Japan-related cross-border deals.”
U.S. companies were involved in about half of this year’s $2.3 trillion in takeovers, data compiled by Bloomberg show. Nomura is ranked 45th among advisers on mergers and acquisitions in the country, down from 22nd last year and 18th in 2011, according to the data.
In Japan, Nomura has been in fourth place since 2012, when it lost a four-year grip on the No. 1 spot. For cross-border deals involving Japanese companies, the firm is ranked 11th, the data show. Morgan Stanley’s venture with Mitsubishi UFJ Financial Group Inc. is No. 1, followed by Goldman Sachs Group Inc. (GS) and Bank of America Corp.
“The focus of the off-site meeting is clear: It’s about Japan and its cross-border acquisitions,” Okuda said. “We will discuss how to collaborate with teams overseas to give clients better proposals.”
Nomura missed out on Tokyo Electron Ltd. (8035)’s $6.8 billion merger with Santa Clara, California-based Applied Materials Inc. this year, a deal that Okuda said his bank “really wanted to do.” Mitsubishi UFJ Morgan Stanley Securities Co. advised the Tokyo-based chipmaking-equipment manufacturer.
Nomura plans to hire bankers to build relations with private-equity firms after U.S. buyout companies made acquisitions valued at $179 billion this year, the most since 2007, data compiled by Bloomberg show.
Leveraged finance, which includes making loans to and managing bond sales for less-creditworthy companies, has remained a busy area for banks as low interest rates boost demand for assets that provide higher yields. Investment banks have arranged more than $500 billion of high-yield bond sales globally so far this year, already surpassing the record $433 billion sold last year, according to data compiled by Bloomberg.
“Leveraged loans are booming in the U.S.,” said Deutsche Bank’s Muraki. “It’s a competitive business but it could generate profit that makes up for the human resource costs.”
Nagai, 54, completed a plan in September to cut $1 billion from costs that mounted after the 2008 purchase of Lehman Brothers Holdings Inc.’s European and Asian operations by his predecessor, Kenichi Watanabe. The number of employees in the Americas fell 12 percent to 2,243 over the two years to September, company presentation materials show.
The Americas is “the region where Nomura has been behind as we couldn’t buy Lehman Brothers’ U.S. business,” Okuda said.
Nagai took over as CEO in August 2012 after Watanabe quit following revelations that staff leaked confidential information on share sales to people who traded using the data. His first tasks included implementing an order from Japan’s financial regulator to bolster compliance.
While Nomura’s profit has grown for more than a year, the gains have been driven by domestic operations such as brokering trades amid Japan’s stock-market rally. Net income climbed to 38.1 billion yen in the three months ended Sept. 30 from 2.8 billion yen a year earlier. Overseas, the company posted a pretax loss of 18.7 billion yen in the quarter, including a 1.3 billion yen deficit in the U.S.
The bank will scout for junior and senior bankers at the start of next year, when talented candidates become available once foreign firms begin paying bonuses in January, said Okuda, who joined Nomura in 1987 and holds an MBA degree from the Wharton School at University of Pennsylvania.
To give domestic employees more global experience, Nomura plans to send as many as 30 junior bankers to study abroad, Nagai wrote in a memo obtained by Bloomberg News in September.
“When it comes to M&A business, the most significant thing is people,” Okuda said. “We need to enhance connectivity. America and Japan, Japan and Asia, Asia and Europe -- we have to think about how to exchange good ideas.”
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