Matchmaker turns suitor: Nomura joins three-way race for local investment bank Avendus

NomuraJapan’s largest investment bank and brokerage firm, has joined the race to acquire local investment bank Avendus, a KKR The holding company, people familiar with the matter said, has moved from being an adviser in the deal to an interested party. avendus The sale process has already sparked great interest from the Japanese financial conglomerate. Mizuhoperceived as the most aggressive contender, and the US buyout fund CarlyleET reported on Sept. 10.

Earlier this year, KKR had appointed Nomura as a sell-side banker for the Avendus transaction, but as the firm joined the fray as a potential suitor, the Japanese bank has relinquished the mandate. KKR may appoint a new adviser.

The due diligence process is underway ahead of final bids being submitted at the end of the month.

KKR and Nomura declined to comment.

Final offers at the end of the month
Due diligence is underway ahead of final bids later this month. KKR and Nomura declined to comment.

KKR, which owns 63% of the company, is seeking a valuation of Rs 5,500-6,000 crore for its nine-year-old investment. However, most bidders are unlikely to shell out such a high premium and are looking at a figure of Rs 4,500-5,000 crore, the people involved said.Capital Gajaanother outside shareholder, owns a minority stake and is likely to exercise its joint sale rights. This requires a majority shareholder to include minority shareholders in a sale on the same terms. Sources said up to two-thirds of the company could be up for grabs based on final valuation figures. Avendus’ three founders and senior employees own the remainder. The US buyout group, led at the time by Sanjay Nayar, acquired a controlling stake in Avendus Capital in 2015 from Eastgate Capital Group and Americorp Ventures, the early investors, for $115 million of primary and secondary capital injection, with the aim of creating a full-service financial services company.

The implied valuation was then around $206 million for the entire company. Interestingly, Nayar is currently a special advisor to Mizuho in India and is leading the negotiations on behalf of the Japanese firm.

Nomura’s new approach
After Bill Hwang’s implosion in 2021 Archegos CapitalNomura, led by CEO Kentaro OkudaNomura has been making a strategic shift into asset and wealth management, as well as alternative asset classes such as private credit and private equity, and advisory businesses in fast-growing markets to deepen its global presence. Nomura took a $2.9 billion hit out of $10 billion in total writedowns stemming from the Archegos fiasco.

Okuda, who took over in 2020, has set out to cut costs while reducing Nomura’s reliance on volatile revenue streams from trading and investment banking. The firm told investors in May that it aims to nearly double its pretax profit in seven years, by delving deeper into wealth management because it offers more stability than trading.

The firm received its commercial banking license in India in 2008, but rose to global prominence the same year after purchasing the Lehman Brothers franchise in the Asia-Pacific region, including Japan and Australia. Since then, it has built a strong presence across all its products – equity capital markets, M&A advisory and financing, as well as fixed income and institutional equities/broking.

Avendus has been diversifying beyond its investment banking vertical, which remains the largest contributor to its revenue (40% in fiscal 2024). It hired a veteran of Citi and Axis Bank Apurva Sahijwani In May, Avendus became the head of its wealth management practice. Having surpassed $6 billion in assets under management (AUM), the franchise plans to grow fivefold to $30 billion by 2030, executives said. In addition to ultra-HNIs and family offices, Avendus also advises more than 100 corporate treasuries and manages $3 billion in treasury assets.

“Avendus is also leveraging its deep relationships with entrepreneurs and family offices to cross-sell products,” said an executive who follows the company. “For example, it has worked very closely with Antics and is also among the lead advisors for the food technology company’s upcoming IPO. His wealth management team managed to secure orders of Rs 2,000-2,500 crore from clients, which in turn played a major role in the decision to increase the offer size.”

Avendus Capital, the investment banking division, is best known for carving out a niche in technology, internet and IT services, helping to buy and sell companies or raise capital. However, in recent times it has also stepped up its efforts in operations in the pharmaceutical, healthcare, financial services and consumer sectors to offer a broader range of advisory services.