Through their involvement in a number of high profile deals in 2009 including Interpark’s sale of its GMarket stake to eBay and their role in KKR’s US$1.8 billion takeover of Oriental Brewery, Nomura Financial Investment Korea (NFIK) has cemented itself as one of the leading M&A advisors in Korea.
Invest Korea M&A, on assignment for the IK Journal sat down with country head Norihiko Nishino to discuss his thoughts on Korea’s M&A market and the country’s financial hub aspirations.
In April 2010, Nomura converted its Korean branch into a licensed subsidiary under the Financial Investment Services and Capital Market Act (FISCMA). What were the factors behind Nomura’s decision to incorporate in Korea rather than remain as a branch office?
As part of our growth strategy in Asia, Nomura was keen to establish a greater presence in key markets, such as Korea. The conversion to a subsidiary demonstrates our commitment to investors and clients in Korea and allows us to enhance our services to them.
Frankly, it just no longer made sense, as the Hong Kong office (previously Nomura’s Korea office was a branch of Hong Kong), although eight times larger, had a smaller product portfolio.
Operating now as a subsidiary enables us to serve our clients better as it eliminates the difficulties of dealing with multiple regulations and procedures, since the customs of capital markets and the relevant acts are different in each country.
For example, we have a successful equity linked warrants business and our status as a licensed subsidiary will allow Nomura to issue its own products, whereas previously we were a third-party liquidity provider.
As a Japanese financial sector company in Korea, where does the competitive advantage lie for Nomura Securities?
It is a bit misleading to refer to Nomura as a Japanese company; we see ourselves as a global company, so naturally our clients expect us to utilize global networks and resources. We have expanded in Asia through localizing to the market. In fact, of the 130 staff here in Seoul, only three are from Japan.
That said, there are more similarities than differences between Japan and Korea in many ways from culture to business, which certainly leads to some expertise cross-over from our long history in Japan. For example, in general, both nations are traditionally wary of foreign investors and the concept of M&A, however this perception is shifting.
Industry wise, there are many similarities with both nations built on the back of export-reliant automotive and electronics industries, while conglomerates account for a large proportion of both nations’ business activities.
As you are aware, the Korean government is promoting Seoul as an Asian financial hub. In this light, what advice would you give the government in order to achieve such a lofty goal?
Whilst nothing is impossible, obviously Korea still has some ground to make up on other centers such as Hong Kong and Tokyo. However, as Korea has proven in other industries, the setting of high goals can be the best way to close the gap and possibly take the lead.
The real challenge for Korea is the chasing of two rabbits — an open financial hub which invites foreign institutions and also the development of the local industry at the same time. The government’s passing of FISCMA in February 2009 as scheduled in the midst of a turbulent backdrop sent a strong message to international financial companies. At that moment, the local industry took a giant leap, thus instilling confidence in policy consistency. It was a move that ultimately prompted us to set up as a subsidiary, and while the contents were modified, the direction was the key.
How does Nomura Securities evaluate the future condition of Korea’s M&A market?
Seeking growth opportunities is a natural instinct for corporations. Given the saturated and matured characteristics for the existing industries in Korea, more and more companies look outward to expand their operations and assets through both organic growth and acquisitions, such as last year’s Korea National Oil Corporation(KNOC) acquisition of Harvest Energy.
Moreover, there have been several corporate restructuring activities in Korea both to align businesses for optimal structure internally and to sell-off non-core assets. Slowly but continuously Korean conglomerates will find their core and focus through these activities. Overall, outbound M&A from Korea and domestic M&A will continue to be active, while inbound M&A to Korea remains opportunistic depending on the appetite and needs of acquirers abroad.
In regard to improving Korea’s M&A market, what suggestions would you give to the Korean government?
To allow Korean corporate growth into globally competitive corporations in size and diversity of business areas, restrictions that can limit merger or acquisitions need to be more flexible. Also, the government should take a supportive stance in encouraging private sector activities involving cross-border operations and networks, in order to help the private sector become truly global.
And what advice do you have for Korean SMEs?
Since I first came to Korea in 2004, I have noticed that the perception toward M&A is changing; Korean companies have realized that international competitiveness comes from size and diversity. Basically, most of Korea’s industries still have room for growth, but to increase domestic companies’ competitiveness, the merging or acquisition of companies is key.
The Korean market itself is not large, therefore healthy competition and cross-border M&A becomes even more important. If SMEs acknowledge that M&A is not only for corporations with large assets, they will discover that they can reap significant advantages from pursuing such a strategy. Through engaging in conversation with companies in Korea and abroad in their respective sectors, SMEs can identify and be prepared when the right M&A opportunities come along.
Nomura is one of the leading M&A advisors in Korea. Through their involvement in a number of high-profile transactions, they have picked up numerous accolades highlighting their capabilities, including best M&A house in Korea by The Asset.
For their role in KKR’s US$1.8 billion takeover of Oriental Brewery, and the latter’s US$912 million-equivalent acquisition financing, Nomura picked up “Best Private Equity Deal” — Finance Asia, “Best Cross-border M&A” — The Asset, “LBO Deal of the Year” — Euroweek Asia, among a swath of other acknowledgements.
Nomura has advised on the following recent Korean M&A Deals :
- Lotte Shopping Co.’s US$629million acquisition of Times (financial advisor to Lotte)
- Kumho’s sale of Daewoo Engineering & Construction (financial advisor to Kumho)
- Interpark’s sale of a 34-percent GMarketstake to eBayfor US$413 million (financial advisor to Interpark)
- Separation of Hanjin Shippinginto Hanjin Holdings Co. and Hanjn Shipping Co. (financial advisor)
By Brett Moffat
(As featured in the IK Journal August issue)
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