Goldman Sachs Group Inc. is on its way to taking the top spot among advisers on Japanese takeovers for the first time in five years, supplanting Nomura Holdings Inc., as companies striving to compete globally turn increasingly to foreign investment banks.
The New York-based firm was hired for $54.1 billion in acquisitions announced so far this year involving Japanese companies, surpassing Nomura’s $47.2 billion, according to data compiled by Bloomberg. In 2010, Nomura held the top spot with $47.6 billion in deals, while JPMorgan Chase & Co. was second with $27 billion and Goldman Sachs at No. 7 with about $10 billion.
Overseas banks are set to occupy three of the top four spots in a market that is headed for a record this year as clients seek advice on competing abroad while consolidating domestic operations following the record March earthquake. Goldman Sachs, ranked No. 2 globally, won the top spot in Japan after advising on two of this year’s three biggest deals.
“Foreign banks are increasingly advising on domestic deals because Japanese companies are merging to compete overseas, and they need their global expertise,” said Koji Hirai, chief executive officer of M&A advisory firm Kachitas Corp. “Goldman’s brand has value because of its history and track record.”
Goldman Sachs advised Sumitomo Metal Industries Ltd. on its $22.5 billion acquisition by Nippon Steel Corp. in what was Japan’s biggest deal in at least five years as the companies sought to increase competitiveness with Chinese and South Korean rivals. It also worked with Swiss drug maker Nycomed on its $13.7 billion takeover by Takeda Pharmaceutical Co. as well as Hitachi Ltd. on its sale of a hard-disk drive business to Western Digital Corp. for $4.3 billion.
Deutsche Bank AG climbed to No. 3 this year, with $47 billion in deals, after advising Takeda on its biggest acquisition. New York-based JPMorgan is fourth and Morgan Stanley’s joint venture with Mitsubishi UFJ Financial Group Inc. took the fifth spot.
Local investment banks were lower in the rankings even as their transaction volumes jumped. The brokerage unit of Sumitomo Mitsui Financial Group Inc. was No. 7 this year; Mizuho Financial Group Inc. ranked No. 8 and Daiwa Securities Group Inc. was No. 9.
Japan has seen 1,663 transactions valued at $141.2 billion this year to Thursday, a record for the equivalent period, spurred mainly by domestic deals, according to Bloomberg data.
“It’s like each industry is building a national team to play overseas, just like with soccer, rugby and baseball,” Hirai said.
Yoshihiko Yano, head of M&As at Goldman Sachs in Tokyo, said he was surprised at how quickly business rebounded after the quake. “Activity appears to have picked up as corporate management in Japan becomes more focused on the domestic industry outlook and the risk of stagnation,” Yano, 49, said in an interview Oct. 5.
Goldman Sachs, which has operated in Tokyo since 1974, is poised to take the top spot for the first time since 2006 in a takeover-advisory market that has been dominated by Nomura for the past four years.
Shinsuke Tsunoda, head of M&As at Nomura, said the brokerage will “continue to leverage our unique insights into Japan and extensive global network to respond to our clients’ needs.” Nomura remains the top adviser for Japanese companies making acquisitions abroad this year, Bloomberg data show.
Goldman Sachs has an edge with local clients on domestic transactions because more than 90 percent of its staff in the Asian nation is Japanese, according to Masanori Mochida, president of the U.S. firm’s Japan unit.
“You may think Goldman is a foreign firm, but it is fully localized,” Mochida told Keio University students at a forum on June 12, 2009. The bank has about 1,000 employees in Japan, of whom 100 do work relating to mergers and acquisitions, according to spokeswoman Hiroko Matsumoto.
As part of efforts to seek business after the March 11 quake and tsunami, the U.S. bank tapped former Prime Minister Junichiro Koizumi to speak to 300 investors and company executives at a forum in Tokyo in June.
“Japanese firms have largely recovered from quake-related damage and are well positioned relative to their global peers because of their excess cash and low debt levels,” Yano said.
Companies are urgently seeking M&As to withstand global competition, he said.
“Decision-making by Japanese corporate management has become faster and more dynamic,” Yano said. “It’s a sea change from 10 years ago.”
Japanese companies have been involved in about $70 billion in cross-border deals this year, the highest since 2008, taking advantage of the yen’s appreciation to expand abroad. The yen climbed to a postwar high against the dollar in August and has gained more than 8 percent in the past six months, the best performance of 16 major currencies tracked by Bloomberg.
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