Cross-border M&A has been a steady driver for sell-side advisory fee growth in the U.S. over the last several years. Despite the strong dollar, international firms have diversified away from slow domestic growth by targeting the relatively attractive U.S. market. Until recently, growth stemmed primarily from European and Chinese buyers; however, Japanese buyers are now taking over the spotlight.
In the last year, U.S. firms paid $420m in sell-side advisory fees for deals with Japan – almost double the fee pool from 3 years ago. Despite Japanese firms’ reputation for making large, trophy acquisitions, the bulk of the fees are now coming from relatively modest, sub-$1b deals. With Abe’s recent re-election, and the likely continuation of “Abenomics,” Japanese firms should maintain their aggressive dealmaking appetite into 2018.
The Big-5 Japanese banks and GCA have a strong position advising Japanese buyers, but the sell-side competitive landscape is more open. Major Japanese banks tend to focus their U.S. coverage on blue-chips; while middle-market advisors in the U.S. tend to have limited relationships in Japan. Given this competitive backdrop, Daiwa’s recent acquisitions of Sagent and Signal Hill could be very fruitful.