Nomura returns to private equity

Japan's biggest brokerage will seed a $900m fund in a boost to its consultancy services and to reinforce businesses in the country.

Nomura Holdings returned to private equity in November last year three years after dissolving its principal finance unit.

Its reason for resuming business: local companies are more open to accepting capital from private equity funds. Nomura also wants to enhance the range of solutions it has for its corporate clients.

In the wake of the announcement, it established a merchant banking preparation office, which will be responsible for sourcing deals.

Nomura’s relaunched unit will seed an initial ¥100 billion ($895 million; €755 million) of its own equity capital to help revitalise Japanese business. It has, however, not yet identified any specific investment targets.

Japan’s biggest brokerage and investment bank plans to back client companies of its retail and investment banking division, as these look at “recalibrating business portfolios, selling off non-core businesses, providing inheritance solutions or M&A,” a source with knowledge of the matter tells Private Equity International. This strategy could also be extended to the bank’s clients across Asia.

A Tokyo-based managing director of a buyout firm finds Nomura’s move “interesting” and is quick to point out that it isn’t a restart of the principal finance unit but a play to be more involved in offering solutions to Japan’s ageing founder owners.

“Nomura’s strategy here is to increase investment opportunities for family businesses with the intention of enlarging these companies and potentially listing them in the near future, which will benefit the firm’s securities business,” the managing director no7tes.

Meanwhile, a chief executive of a Japanese lower mid-market firm, added that the fund does not look like a typical private equity vehicle, since it isn’t raising capital from external visitors.

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

Its deals included Nagasaki 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 Group chief executive Koji Nagai said that the firm is working toward a 2020-and-beyond vision that addresses structural shifts in Japan such as the increase in senior population, the rise in business succession needs as small and medium-sized enterprise owners age, as well as the rapid change in consumer spending due to advances in digital technology.