Expansion of Investment Banking Operations

「Crisis-response engagements relating to activist response, control contests and M&A increased, mainly due to an increase in activist-response engagements, and amounted to ¥2,428 million, up 14.0% from the same period of the previous year.」

「For special-situation projects relating to activist response, contests for control and M&A, engagements continued to be secured, particularly PA and FA engagements involving activist response.」

「Large-scale projects (¥50 million or more) during the six-month consolidated period declined 36.5% year on year to ¥430 million. Ordinary projects (less than ¥50 million) increased 18.1% year on year to ¥2,653 million, as new and additional engagements, including annual retainer agreements for equity consulting based on strong relationships of trust with customers, increased.」

「Large-scale projects of ¥50 million or more during the fiscal year under review amounted to ¥1,442 million, down 26.8% from the same period of the previous year, due to a decline in the number of engagements for control-contest PA and FA projects and some corporate-side FA projects.」

「Crisis-response engagements relating to activist response, control contests and M&A amounted to ¥1,107 million, down 20.4% from the same period of the previous year, due to a decline in engagements including control-contest PA and FA projects.」

「Large-scale projects of ¥50 million or more during the fiscal year under review amounted to ¥1,969 million, an increase of 6.5% from the same period of the previous year, reflecting engagements centred on control-contest PA and FA projects.」

「Crisis-response engagements relating to activist response, control contests and M&A during the first 9 months of the fiscal year amounted to ¥2,049 million, an increase of 13.5% from the same period of the previous year. As corporate and business reorganisations are expected to become more active and concerns over mounting capital risks grow, engagements for PA and FA services, particularly those relating to corporate control contests, are also increasing.」

「As corporate and business reorganisations are expected to become more active and concerns over mounting capital risks grow, engagements for PA and FA services, particularly those relating to corporate control contests, are increasing. In addition, as crisis-response engagements became more sophisticated and complex, the amount of fees per engagement increased, resulting in higher fees from crisis-response engagements.」

「Although crisis-response engagements relating to activist response, control contests and M&A were affected by the inability to actively propose and execute a wide range of corporate reorganisations and M&A transactions, particularly PA and FA work relating to control contests, engagements continued, mainly for activist-response PA and FA services. In addition, as crisis-response engagements became more sophisticated and complex, the amount of fees per engagement increased, resulting in higher fees from crisis-response engagements.」

「Engagements for large-scale projects of ¥50 million or more declined substantially, partly because since June 2022 the company has been unable to actively propose and execute a wide range of corporate reorganisations and M&A transactions, particularly PA and FA work relating to control contests and other matters.」

「Engagements for large-scale projects of ¥50 million or more declined substantially, partly because since June 2022 the company has been unable to actively propose and execute a wide range of corporate reorganisations and M&A transactions, particularly PA and FA work relating to control contests and other matters.」

「Regarding the impact on operations of investigations and other actions by the Securities and Exchange Surveillance Commission, as of now only a small number of existing clients have cancelled their contracts. However, the timing of contracts with new clients that were in negotiations has been deferred, and the launch of large-scale PA and FA projects has also been delayed.」

「In addition, following the smooth start of JOIB, the investment banking consolidated subsidiary, engagements for large-scale PA and FA projects of ¥50 million or more relating to control contests and other matters increased substantially, including the pipeline.」

「During the third quarter, a symbolic case emerged in Japan in which a strategic buyer (operating company) launched a contest for control of a listed company, and the matter was resolved successfully. The Group’s success as the unique PA and FA adviser in this case attracted considerable attention and accelerated engagements for large-scale projects on both the offensive and defensive sides.」

「As of now, large-scale projects scheduled for completion by the end of the fiscal year are progressing steadily, and large-scale projects such as asset sales are also progressing toward full completion in the second half. In particular, in addition to large-scale projects already under contract, large-scale projects likely to be contracted are expanding extremely smoothly.」

「Meanwhile, total engagements for large-scale projects of ¥50 million or more amounted to ¥890 million, down 16.6% year on year. Although we maintained a high level of engagements for comprehensive PA and FA services relating to corporate and business reorganisations, control-contest PA and FA services relating to hostile tender offers by activists and operating companies, and activist-response PA and FA services, the decline resulted from delays in executing some large-scale projects carried over from the previous fiscal year, including tender offer-related projects and asset sales.」

「株式会社アイ・アール ジャパン, a wholly owned subsidiary of our group and a Type I Financial Instruments Business Operator, and 株式会社JOIB (Japan Originated Investment Bank, Inc.), established in February this year, continue to secure equity consulting engagements at a high level as highly agile investment banks. As completely independent financial consulting firms with a unique position, they provide sophisticated analysis and solutions while standing fully alongside a diverse range of clients who are highly sensitive to mounting capital risks, and can consistently undertake the execution of actual corporate and business reorganisations, both defence and offence. They have a large number of highly specialised personnel.」

「As Japan enters an era of major corporate realignment, control contests by strategic buyers, including domestic and overseas operating companies, and by major shareholders, including operating companies and founding families, are becoming established as an important means of pursuing corporate growth strategies. Tender offers and proxy contests are expected to increase rapidly as means of executing those strategies.」

「As a result, among the large-scale projects completed in the first half, PA and FA work relating to control contests increased substantially, while activist-response PA and FA work, in which we continue to have an outstanding track record, also significantly exceeded the previous year. In addition, attention to our FA services for MBOs has risen markedly on the back of our extensive track record, and we continued to receive engagements for large-scale projects.」

「In the Investment Banking Division, which handles PA and FA services, we are further refining our distinctive strengths, including our independent ability to stand firmly alongside clients and avoid conflicts-of-interest risk. We are also strengthening our team with personnel experienced in sophisticated financial structures, further raising our presence as an entirely new type of FA in the capital markets. Engagements for large-scale projects aimed at responding to activists and enabling strategic buyers to acquire control expanded steadily.」

「Large-scale projects during the fiscal year under review, defined as projects of ¥50 million or more, generated ¥910 million from control contests involving PA and FA services, ¥1,514 million from activist-response PA and FA services, ¥705 million from corporate-side FA services such as MBOs, and ¥110 million from large-scale SR and PA services, for a total of ¥3,239 million.」

「In addition, the steady completion and progress of large-scale projects already contracted by the Investment Banking Division, which combines PA and FA capabilities, resulted in sales and revenue recognition during the quarter, while engagements for new large-scale projects increased substantially.」

「Specifically, our work includes responding to activists with the full use of collective engagement to secure approval of shareholder proposals; fundamental reviews of capital policy and portfolios; quantitative analysis of share buybacks and dividend policies; MBOs (going-private transactions); capital and business alliances; and M&A, both defence and offence, including conducting a tender offer as FA for an operating company and acquiring control through a proxy contest as PA for an operating company. During the fiscal year under review, we entered into contracts with a wide range of clients for engagements that contributed to revenue.」

「As engagements have expanded from proxy assignments to M&A assignments, our Financial Adviser (FA) business, another of our strengths, has organically expanded its engagements by leveraging its distinctive independent perspective and focus on minority shareholders.」

「Building on an extensive transaction network supported by relationships with more than 600 listed companies, we have strengthened our presence as a unique independent FA by assembling an extensive in-house team of experienced specialists in proxy fights, hostile takeovers and corporate governance, in addition to attorneys and certified public accountants. We will continue to strengthen our organisational structure by recruiting experienced personnel and further expand our investment banking business by making integrated use of our group's resources and expertise.」

「In the Investment Banking Division, in addition to a cutting-edge PA (Proxy = proxy fight adviser) consulting platform with a unique track record, we are strengthening an FA (Financial Adviser) consulting platform by expanding our team of legal, accounting and financial specialists. We are steadily increasing the number of engagements in which our group, an independent FA in proxy contests and M&A activism, applies its strengths to requested assignments, as well as flexibly responding to a wide range of M&A requests from listed-company clients with whom we have developed relationships, including acquisitions of unlisted companies and sales of subsidiaries.」

「In the Investment Banking Division, efforts to secure specialist talent, including certified public accountants, attorneys and professionals with M&A advisory experience, at the new Marunouchi office have paid off. The division successfully completed FA engagements including an M&A transaction involving a listed manufacturing company acquiring an unlisted manufacturing company, an M&A transaction between land transportation and logistics companies and marine transportation and logistics companies, and the transfer of shares by a major shareholder of a listed company through an MBO. It also received more engagements as proxy advisers (PAs) for large-scale M&A transactions. The pipeline of new M&A FA and PA engagements continues to grow steadily.」

「In addition, the specialist investment banking team assembled at the new Marunouchi office expanded mandates for large transactions, using its exceptionally high success rate in proxy contests as a competitive strength. It also successfully expanded its services from the traditional PA domain into FA. An FA mandate related to the execution of a large-scale tender offer for the company's own shares is one example.」

「In January 2018, the company opened a new investment banking office in Tokyo's Marunouchi district and brought together in the new office a strong new organisation capable of handling every type of situation, adding specialists in accounting and legal affairs to its expertise in M&A and proxy transactions. In addition to acting as FA on a large M&A transaction that could trigger industry consolidation, the company increased mandates for FA services on transactions where the Group's strengths are valuable, including those involving contests for control and complex shareholder structures.」

「The Group is pursuing the organisational expansion of its investment banking operations as a key management policy. As M&A activity among listed and unlisted Japanese companies becomes more active, we aim to strengthen our distinctive presence in equity-related M&A, including proxy and financial advisory (FA) services, by bringing together at the Marunouchi office newly opened on 9 January of the current year a team of investment banking professionals covering equity, particularly voting rights (proxy) consulting, as well as accounting, finance, financing and compliance. Proxy consulting, which boasts an exceptionally high success rate, continued to receive more mandates during the current quarter, while the completion of large FA mandates handled by the expanded M&A team made a substantial contribution to higher earnings.」

「In investment banking, proxy advisory services related to corporate defence and voting rights increased substantially amid changes in the market environment. In addition, the company developed high-profile mandates as a financial adviser, and the completion of certain large M&A transactions contributed to higher earnings. In addition to the existing pipeline, the increase in personnel from the previous fiscal year led to more new mandates, establishing an organisational structure capable of operating at full scale.」

「Several M&A advisory transactions also commenced, and the organisation expanded in the previous fiscal year has begun to function effectively. However, because completion of the mandates was delayed until the second quarter or later, this contributed to the decline in IR and SR consulting revenue.」

「Since the current consolidated fiscal year, the investment banking business has expanded both its organisation and scope of operations, steadily building a track record, including the completion of multiple M&A advisory transactions, a key area of focus.」

「In the first nine months of the current consolidated fiscal year, the Group's revenue increased 13.4% from the previous fiscal year as it progressed toward full-scale operations. This reflected growth in revenue from its core SR consulting business amid rising demand for consulting related to corporate governance code compliance, corporate reorganisations and corporate control (voting rights), as well as the completion of certain large mandates received by its investment banking business.」

「In investment banking, FA services related to M&A and financing transactions have increased, and the number of transactions reaching closing has also steadily grown.」

「In investment banking, the expansion of the organisation and operations has increased business opportunities, and demand has grown for financial advisory services related to M&A and financing transactions, in addition to securing voting rights (proxy votes).」

「Going forward, we will seek to further expand our investment banking operations by making integrated use of the Group's resources and expertise, based on a customer base focused on more than 500 listed companies.」