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Nomura is planning to revive its shuttered private equity business in a bet that ageing demographics, economic migration and competitive pressure will propel Japan into a new era of divestment, restructuring and management buyouts. 

The plans, which were announced on Wednesday, follow a string of eye-catching Japan-based deals led by private equity. They include the $18bn sale of Toshiba’s memory chip unit to a group led by Bain Capital and a pair of recent deals by KKR. 

Nomura intends to make an initial investment of about ¥100bn in the private equity arm, which will in turn be part of a broader “merchant bank” unit. The expansion comes as Nomura earlier this year said it was hiring more M&A bankers in the US in a play for a bigger slice of an ongoing overseas dealmaking spree by Japanese corporations. 

By rebuilding its private equity business, Nomura seeks to widen the scope of its client advisory business and move deals forward using its own capital.

The creation of a merchant bank represents a belated effort by Nomura to expand the range of services it can offer clients — a group that increasingly includes small and medium-sized business owners in their late 60s with no heirs, no succession planning and ever stronger incentives to sell their businesses to a consolidator. 

A government survey conducted earlier this year found that half of small to medium-sized enterprises where the chief executive was over the age of 60 said they were looking for a successor but were unable to find one.

According to Nomura’s own analysis, between now and 2040, about 40,000 Japanese businesses each year will find themselves struggling to find a new leader. Many will quietly close, but others are expected to at least explore the possibility of a sale. 

A handful of companies, including Nihon M&A Center and M&A Capital Partners, have already established roaring businesses advising the soon-to-retire presidents of small companies on that type of deal. 

Since the start of 2013, Nihon M&A Center’s share price has risen more than 1,000 per cent, but in a recent interview its senior executives said it saw a growing risk that much larger companies, such as Nomura, would spot the opportunity and wade into an area previously seen as not worth the bother. 

More broadly across corporate Japan, the gradual march of corporate governance and stewardship improvements has begun to affect boardroom decision-making. Large numbers of Japanese companies maintain large subsidiaries and sometimes high-quality but non-core businesses that they are under pressure to sell. 

For private equity firms such as Bain Capital, KKR, Permira and others already operating in Japan, this type of sale — or more extensive restructuring — offers potentially rich pickings. Nomura’s venture back into PE, say analysts, will allow it to compete for that. 

Nomura, Japan’s biggest investment bank, is making the return to private equity after closing its unit in 2014 — before the axe fell, it had not made a new deal since 2008. Its final activities included an investment in Huis Ten Bosch, a Dutch-themed park in the far south of Japan that has since become the prized property of the country’s second biggest travel agency, H.I.S.

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