Goldman Sachs Is Getting More Bang From Japan's M&A Spree

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Goldman Sachs Is Getting More Bang From Japan's M&A Spree
Credit: © Reuters.

(Bloomberg) -- Japan Inc.’s record acquisition spree is proving to be better news for overseas investment banks than for their home-grown rivals.

Foreign firms led by Goldman Sachs Group Inc (NYSE: GS ). grabbed the first three places in Japan’s merger advisory rankings last year, handling deals worth a combined 44.6 trillion yen ($403 billion), according to data compiled by Bloomberg. Nomura Holdings Inc., Japan’s largest investment bank, slipped out of the top three for the first time since 2016.

Japan’s bankers are falling behind partly because of the high proportion of M&A deals involving foreign targets, where they are less well placed to provide advice, said Tomonori Ito, a professor at Hitotsubashi University. Non-Japanese banks accounted for five of the seven that advised Takeda Pharmaceutical Co. on its $62 billion purchase of Shire Plc (LON: SHP ), the world’s biggest announced acquisition of 2018, according to Bloomberg-compiled data.

Japanese banks are in a “very difficult situation” after struggling to build franchises abroad, said Ito, himself a former UBS Group AG investment banker. “M&A advisory requires advanced knowledge and know-how, meaning that you can’t win a financial advisory role unless you have information about overseas companies.”

Corporate purchases abroad will likely remain a driver of Japanese takeovers this year, said Yoshihiko Yano, head of M&A at Goldman Sachs in Tokyo.

In 2018, there were about 3,400 mergers and acquisitions involving Japanese companies, a record, according to data compiled by Bloomberg. Those deals totaled an unprecedented 34.3 trillion yen. Japanese purchases of overseas firms accounted for 61 percent of the figure, up from 49 percent in 2017, when Nomura held the number two slot in the overall rankings.

Morgan Stanley (NYSE: MS ), which has two investment banking joint ventures in Japan with Mitsubishi UFJ Financial Group Inc., was second in last year’s rankings, followed by JPMorgan Chase & Co (NYSE: JPM )., the data show. Nomura slipped to fourth place, and Sumitomo Mitsui Financial Group Inc. came fifth.

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