Nomura relaunches PE platform

Japan’s largest brokerage firm will put up $895m of its own capital to seed a fund that will target succession-led deals and corporate carve-outs.

Nomura Holdings, Japan’s largest securities company, is rebuilding its private equity business and plans to seed a Japan-focused fund with ¥100 billion ($895 million; €755 million) of its own capital.

Capital from the fund will be aimed at backing restructurings, succession and management buyouts, although it has not yet identified targets, Nomura said in a statement.

Initial investments from the fund will be in its retail and investment banking clients’ companies in Japan, when they may be looking at recalibrating business portfolios, selling off non-core businesses, looking at business succession or M&A, a source with knowledge of the matter told Private Equity International.

PEI understands this could be extended to its clients outside of Japan in the future.

Details of the fund have yet to be disclosed, but the source said Nomura is not looking to raise capital from external investors.

Nomura’s move is in response to its clients’ growing need for a wider range of investment solutions. The fund will be managed by a newly established Merchant Banking Preparation Office, which is tasked to manage and source investments for the firm.

With principal finance taking root in Japan in recent years, local companies are more open to accepting capital from private equity funds, for example, in providing inheritance solutions, the source pointed out.

“Nomura coming back to private equity in Japan is another example of how firms are becoming more aware of the private equity investment opportunities here,” said Tsuyoshi Imai, a Tokyo-based partner at Ropes and Gray.

“Generally investment opportunities in Japan were under-appreciated compared to China or South-East Asia, in large part due to stagnant growth over the year until about 2014 to 2015,” he added. It also takes much more discipline, experience and sourcing skills to generate large returns in a mature economy, but I think more firms are realising that it’s possible to generate desirable returns on Japanese investments.”

Nomura’s investment unit, Nomura Principal Finance, was set up in 2000 as a wholly-owned subsidiary. As a result of tighter financial regulations following the global financial crisis, Nomura decided not to make any new investments from 2008 onwards and Principal Finance dissolved operations in 2014. It had made a total of 18 investments worth about ¥280 billion and generated approximately 25 percent internal rate of return for the firm.

Some of the unit’s deals include theme park resort Huis Ten Bosch, which it bought in 2005; Japanese restaurant chain Skylark, which it sold to Bain Capital in October 2011; and industrial machinery company Tsubaki Nakashima, which it sold to The Carlyle Group in March 2011.

Nomura also previously backed funds managed by Jiu You Quan Xing Equity Investment Fund, Vietcombank Fund Management and Terra Firma Capital Partners, according to PEI data.

Nomura has ¥47 trillion of net assets under management through its investment trust and investment advisory businesses as of 30 September 2017. Assets of its retail clients exceed ¥115 trillion.

It absorbed Lehman Brothers’ European and Asian operations and staff after the US brokerage firm filed for bankruptcy in September 2008, which led to losses. In 2012, Nomura began a $1 billion cost-cutting strategy at its wholesale unit, with cuts mainly from its overseas operations.