Independent M&A boutiques are sensing an opportunity in Japan as the country’s top corporate names increasingly look to firms not tied to large commercial banks when awarding cross-border mandates.
Leading the pack is GCA, a Japanese boutique launched in 2004 that won advisory roles on 2007’s two largest deals and also scooped one of Euromoney’s deals of the year awards for its ambitious merger with US peer Savvian. Now global M&A powerhouse Lazard is moving in, scooping up Tetsuya Kawano, former president of JPMorgan Securities Japan, to round off a spate of recent hires.
"Japanese clients are becoming more and more sophisticated," says Yasushi Hatakeyama, president and chief executive of Lazard’s Japanese investment banking subsidiary, Lazard Freres KK. "As global market conditions become more challenging, senior management face difficult strategic choices and we provide clients with the independent, objective advice that they need."
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Tetsuya Kawano: an independent voice |
Kawano is an experienced M&A banker, having spent eight years at Goldman Sachs before joining JPMorgan. He had already left that firm when Lazard came calling but securing his services in the small and insular world of Japanese M&A is still something of a coup. An M&A banker at a foreign investment bank says: "There simply aren’t that many experienced M&A professionals in Tokyo, for the obvious reason that there hasn’t been much activity here in the last 15 years or so. Most of the top guys are closely protected by their firms, and are unlikely to come on the market unless you want to spend a lot of money."
Best interests
If the network of M&A bankers in Tokyo is somewhat opaque and claustrophobic, so too is the business itself: Japan’s still-present web of inter-corporate ties make it difficult for companies to know whether the investment banking arm of a large commercial bank will act in their best interests. Kawano says: "Both shareholders and stakeholders are increasingly concerned about the conflict-of-interest issue – as transaction structures become more complex, the conflict-of-interest issue becomes more complex as well. As a trusted adviser with a global network, we advise clients on an independent basis and provide creative new ideas."
It won’t necessarily be easy: the fact that GCA’s two landmark deals, Citi’s acquisition of Nikko Cordial and Mizuho Securities’ merger with Shinko Securities, are struggling towards completion after delays and renegotiation of terms in both cases, might not help the independents’ case. The expected wave of deals taking advantage of the new regulations permitting triangular mergers has not arrived, and although top Japanese companies such as Nippon Sheet Glass and Japan Tobacco have completed successful acquisitions overseas there’s no guarantee that the market will grow dramatically this year. Nonetheless, the Japanese securities firms and their Wall Street counterparts alike might soon face much tougher competition from M&A specialists, and that can only be healthy for the market.