What is stopping the Japanese Banks from M&A?
Every year I hear about the Japanese firms( nomura and mizuho) poaching MDs or acquiring smaller firms to boost their M&A. However, it seems it only has marginal effects. What is preventing the Japanese firms from becoming larger players in the M&A space in the US? Other international firms such as TD or BNP seem have more growth.
It's extremely hard for a small or medium-sized bank to move up the rankings just in general I think - there are few examples (maybe Houlihan?) of successfully moving up the rankings through buy-and-build. As far back as at least I can remember the top tend which dominate the headlines have always been that.
My guess is that this is related to financing and pay-to-play. Japanese bank cost of funds is a bit higher than the big US banks as those domestic Japanese funds need to be hedged, and it's difficult to be competitive. There's also some conservatism and weak leadership - Nomura is notorious for entering and then pulling out of business lines, for example.
That said, I wonder if there's been a proper analysis of this. As is, we'll all know about it if Sumitomo becomes a top 5 bank, but would we notice if Mizuho moved from 40th to 25th?
Japanese banks are largely risk averse and don't want to rock the boat. Pros and cons for this strategy. Also their systems are pretty outdated as well or they don't use standard stuff like Loan IQ.
A lot of Japanese banks also view their US business as a side hustle vs something to really blow up their business.
Lol the person who downvoted can feel free to chime in. Anyone who has worked at a Japanese bank knows what I am saying.
I work at a European bank and it's so similar. Transaction returns are the highest in US yet they want to pay people the same as in Europe. Then they wonder why turnover is high.
Interned at a Japanese bank in their crappy "M&A" group. (Parentheses bc no deal flow), now A1 elsewhere.
Everyone in my group who was poached from another bank (VPs and Directors from BBs/EBs) quit and all the MDs from other more developed banks were fired by head of M&A in Tokyo who saw how bad the group was underperforming compared to the rest of the market back in Summer 2021. Many of the MDs didn't know what they were doing.
Don't keep tabs on my intern group anymore, but Japanese banks like others have said are too risk averse, don't have much credibility as advisors in the American market, and can't really attract the talent needed for the group to be run by people who know what they're doing and can actually grow the franchise.
I recommend going to Japanese banks for project finance and maybe DCM / lending as they tend to be strong in those areas and then trying to lateral or rerecruit full time
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