Japan's Daiwa Securities eyes Italian return with M&A advisory office

TOKYO, Dec 27 (Reuters) - Daiwa Securities Group Inc is considering opening an M&A advisory office in Milan, as the Japanese investment bank makes a cautious return to expanding its overseas business after a major restructuring drive seven years ago.

“Italy’s economy is big. We pulled out from Milan twice in the past. This time, we are considering having a base for M&A advisory business there,” Seiji Nakata, CEO of Japan’s second-biggest investment bank and brokerage, said in an interview.

To stem losses outside Japan, Daiwa cut jobs in 2010-2012 and closed operations overseas including a branch in Milan, the business capital of the euro zone’s third-largest economy. The company has since switched back to pursuing growth, with merger-and-acquisitions (M&A) advisory one of its focus areas.

Last year, it bought two boutique M&A advisory firms - Sagent Holdings Inc and Signal Hill Holdings LLC - to strengthen such operations in the United States.

It now aims to build up its advisory business in Europe. Last week, Daiwa announced the acquisition of boutique Spanish investment bank Montalban Atlas Capital for an undisclosed sum. With it, Daiwa’s European investment banking unit, DC Advisory, will have six offices including in France, Germany and Britain.

Daiwa’s M&A-related fees grew to 21.7 billion yen ($195.13 million) in the year through March 2018, from 10.3 billion yen three years earlier, company presentation materials showed.

The firm is not seeking to advise mega-deals worth billions of dollars. Instead, it is trying to build a business targeting cross-border mid-market deals, valued at up to $500 million.

In the global mid-market M&A advisory segment for the first nine months of 2018, Daiwa ranked 50th in terms of the number of deals advised, showed data from Refinitiv.

“There is a gap from global mid-cap advisory top runners like Rothschild, Lazard and Houlihan Lokey ,” Nakata said. “We would like to keep increasing bankers and offices.”

Nakata also said he wants to expand the number of bankers covering initial public offerings (IPOs) in Japan, where he sees a robust deal pipeline for the next year.

There have been 91 IPOs in Japan this year, almost all from small companies. Besides SoftBank Corp’s record $23.5 billion IPO, the only offering to exceed 100 billion yen was that of flea market app operator Mercari Inc.

There will be more than one IPO in the league of Mercari next year, Nakata said, “if things go smoothly.”

$1 = 111.8200 yen Reporting by Taiga Uranaka, Taro Fuse and Takahiko Wada; Editing by Christopher Cushing