• Bloomberg


Nomura Holdings Inc. is losing its four-year grip as lead adviser on takeovers after losing out on the biggest deal in 2012, raising questions about its ability to arrange financing for clients and the pace of its rebound from the insider trading scandal.

Mizuho Financial Group Inc. overtook Nomura this month after winning a role advising and managing funding for Softbank Corp.’s record $20 billion bid for U.S. based Sprint Nextel Corp.

Mizuho has worked on Japanese mergers and acquisitions announced this year valued at $77 billion, while Nomura advised on deals worth $52 billion, Bloomberg data show.

Nomura’s waning M&A status is a setback for Chief Executive Officer Koji Nagai, who took over Aug. 1 following revelations that employees tipped off traders about clients’ plans, prompting his predecessor to resign.

It also reflects the disadvantage Japan’s top brokerage has compared with banks that can marry loans with merger advice at a time when domestic companies are spending a record amount on takeovers abroad.

“Compliance matters when clients look for an adviser, especially on cross-border deals, as the U.S. and Europe are very strict about it,” said Koji Hirai, head of M&A advisory boutique firm Kachitas Corp. “The financial adviser’s lending power is also becoming more crucial in the selection process.”

Softbank hired Deutsche Bank and Raine Group for its takeover of Sprint in the largest overseas acquisition announced by a Japanese firm in at least 12 years. Mizuho is also advising Softbank on its plans to buy domestic rival eAccess Ltd. for ¥180 billion.

Nomura is absent from that transaction as well. Keiko Sugai, a spokeswoman for Nomura, declined comment on the company’s M&A advisory performance.

For Softbank CEO Masayoshi Son, the Sprint transaction is a “once-in-a-lifetime deal,” said Hirai, a former M&A head at a brokerage unit of Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender.

Nomura has worked for Softbank before, managing the mobile phone carrier’s 1994 initial public offering and additional share sales until 2003.

“As a standard for selection, we offered the mandates to companies that have a steady performance and track record on a long-term basis,” Softbank spokeswoman Makiko Ariyama said, declining comment on specific firms.

Nomura also lost market share managing bond and equity sales in the quarter that ended in September from the previous three months, the data show.

The securities firm acknowledged in June that employees leaked information on equity offerings it managed in 2010. Nagai said Sept. 6 that the breaches cost it mandates, including the government’s plan to sell Japan Tobacco Inc. shares and a lead role managing Japan Airlines Co.’s $8.4 billion IPO.

That may have hampered a profit recovery last quarter. Nomura probably had net income of ¥5 billion for the three months that ended Sept. 30, compared with a loss of ¥46.1 billion a year earlier, according to the average estimate of nine analysts in a survey. The brokerage is scheduled to report its earnings Monday.

“Investment banking business fell in the second quarter because of the insider trading scandal related to public share offerings,” Tatsuo Majima, an analyst at Tokai Tokyo Financial Holdings Inc., wrote in a report dated Tuesday. Nomura lost lead management roles in October as well, so “it’s hard to say that the impact of the scandal is fading,” he said.

The Japan Securities Dealers Association this month fined Nomura ¥300 million, the biggest penalty it has imposed against any firm in 12 years, saying its brokerage unit lacked internal controls to safeguard information.

Nagai, 53, has vowed to regain public trust by implementing improvements ordered by the Financial Services Agency. He is also cutting $1 billion in costs and scaling back abroad, just as Japanese companies look overseas for growth.

Nomura’s global retrenchment may make it less attractive to potential clients seeking advice on how to expand beyond Japan, according to Yuri Yoshida, a credit analyst at Standard & Poor’s in Tokyo. “Japanese financial firms have to follow their clients by going abroad, as the home market is stagnating.”

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