ONE of Japan's giant trading companies, Mitsubishi, is elbowing its way into the exclusive world of investment banking with a strategy it calls ``full-service M&A.'' Mitsubishi is complementing matchmaker services performed by merger-and-acquisition specialists with ``after deal'' assistance in corporate law, human resource management, strategic planning, and other areas designed to help a new company operate smoothly. Mitsubishi hopes its supermarket of advisory services will particularly appeal to small and midsize Japanese manufacturing companies with little experience in overseas investments.
By vying for Japanese clients, Mitsubishi will be going head to head with the leading American takeover specialists, who have thus far mediated most of the Japanese acquisitions of United States companies. The Blackstone Group, led by former US Commerce Secretary Peter Peterson, earned millions of dollars in advisory fees on two Japanese deals alone in 1988: Sony's takeover of CBS Records and Bridgestone's purchase of Firestone.
Japanese banks and securities firms, raised in a corporate culture that shuns mergers and acquisitions, have thus far been frozen out of the lucrative business. They have sought to overcome the experience gap by entering strategic alliances with US competitors.
Mainstream investment banks are watching Mitsubishi's inroads into their exclusive domain, but remain skeptical that ``full-service M&A'' will pose a significant competitive threat.
Mitsubishi considered linking up with a US takeover firm but decided to proceed independently.
``We concluded that American investment banks could not understand or accept our approach to the business,'' says Masakazu Okamoto, chairman of MIC Consulting, Mitsubishi's mergers-and-acquisitions subsidiary. MIC Consulting was recently granted a license by the Securities and Exchange Commission to act as a securities broker.
For Mitsubishi, entry into the mergers-and-acquisitions business is both an opportunity and a necessity. In recent years, Japanese trading companies have been under pressure to diversify into new businesses. The Japanese economy is becoming less dependent on exports, and many of the manufacturing companies that traditionally used trading companies as their eyes and ears to the world have invested overseas and developed their own global marketing skills. In the United States alone, Mitsubishi Corporation's diversification has led to the creation of more than 20 subsidiaries, ranging from copper mining to production of mobile telephone systems. Half the subsidiaries were acquired, and Mitsubishi's own staff did the scouting and investment analysis of potential takeover targets. Mitsubishi has developed banking-related skills by operating its own leasing company and arranging financing for clients and management of its own huge portfolio.
Mitsubishi saw an opportunity to compete with investment banks by pooling the skills used in its various businesses in a separate subsidiary. MIC Consulting was created in July 1987, and has since received fees on 25 deals, eight of which were mergers or acquisitions. The remaining fees were for various services, such as accounting and data processing, performed for Japanese companies opening new offices in the US. The MIC Consulting staff in New York has been expanded to seven, and is working closely with a new 20-member corporate finance department that Mitsubishi Corporation has created in Tokyo. The new department, company officials say, will operate a leveraged-buyout fund within three to four years.
Two of MIC Consulting's largest deals have been prime examples of its ``full service'' strategy. Last year MIC arranged for Mitsubishi Cement to purchase a Kaiser cement plant in California for $185 million. Mitsubishi Cement has since asked MIC Consulting to help structure an employee pension plan.
MIC Consulting also arranged an auto parts manufacturing joint venture between Plumly of Tennessee and Marugo Ltd. of Japan, neither of which has much international experience.