Reuters Insider - Breakingviews TV: Green Street
12/12/2019 18:49
Click the following link to watch video: https://share.insider.thomsonreuters.com/link?entryId=0_nuaj17ad&referenceId=0_nuaj17ad&pageId=ReutersNews Source: Thomson Reuters Description: Japanese investment bank Nomura is buying Greentech Capital Advisors, a niche Wall Street firm focused on deals in renewable energy and the like. With the rising influence of climate change on companies of all kinds, it could prove a handy base for expansion, says Antony Currie. Short Link: https://tmsnrt.rs/2LM7Yve Video Transcript: This video is sponsored by Refinitiv. The company that powers the financial markets. Antony Currie, so Nomura - the Japanese investment bank - is having another go at the ramparts of Wall Street. Yeah. Now this is smaller than some of the ones in the past. But it's sort- Nomura is a little bit famous or infamous for doing big things, trying to get into Western-style investment banking and then pulling back a bit later, sort of with its tail between its legs. Yeah, it becomes a bit butt of its rivals' jokes really. Now this is a different thing though. So just tell us what's going on and why it's kind of quite interesting? Yeah, so Nomura is buying a very small New York-based investment bank called "Greentech Capital Advisors". And basically, it basically does mimic and old UK advert, exactly what it says in the tint, "Green Technology". So it's well-renowned for doing sort of deals between renewable energy companies, sustainable infrastructure, that kind of thing, water as well. It's mostly smaller deals between those already doing that kind of business. Right. And this is obviously a big- all those are big renewable energy, for example, a big growth market in terms of the companies involved in solar and wind and all this kind of stuff. Exactly. It's been pretty busy. So having spoken to the guys, they were saying, "Look, we'd estimate the fees have gone up a third in each of the past three years." So it sounds pretty good, makes you wonder why they're selling, it was getting that big. But also, I mean, my general idea is that this is going to get M&A involving climate risk, involving renewable energy, is going to take off and involve bigger and bigger companies. Which means if you're Nomura, or any other bank, you really want to have some good people on board who can deal with it. Right. And these are people who can deal with those specific aspects of the companies doing that. But I think you have a broader point, an idea in mind, which is that big companies of all kinds, whether they're engaged in this business or not, the climate change, changes in energy policy, changes in all kinds of things, are going to drive transactions, whether they're in this business or not. Yeah, absolutely. I mean, you've got companies ConocoPhillips saying, "Look, we're not looking at renewable sources like wind and solar at the moment," but that may change. Exxon doesn't talk about it at all, but they may want to buy something in carbon capture for example. But you think water companies, steel companies, transportation companies- all of them have to grapple with this risk. And the idea that M&A bankers can come along and say, "Here are deals you should be thinking about, but also, here are deals you might not be thinking about the climate risk but this one is in a bad area for water scarcity, this one actually has more emissions in its supply chain than you might be thinking about." And what a great way of actually adding an extra bow to your quiver as an M&A banker and say, "Let's start looking at one of the biggest emerging ideas that has really captivated people's imagination for the past." Greta Thunberg just this week was made Time Person of the Year for example for all her work on this. So just going back to Nomura for a second. It's a little unfair to lump this with a big thing like buying like the bankrupt Lehman's European business. It's a small incremental step. So do you think it can make a better chance of success than in the past? Well, on the one hand, it's also that the person who runs Greentech and the person who runs investment banking here in the US for Nomura worked together years ago at UBS. They know each other very well, so that helps. Also, look- I mean, for Nomura, it's a much smaller deal. Rumors were at a $100 million. So it's not like it's putting a lot of money at stake. It's not going to out and try to hire lots of bankers on top of this necessarily. It's a good - pardon the pun - sustainable base upon which to build a decent part of the business. But it's not going hell for the leather like it did, say, under Ethan Penner in the 1990s in commercial real estate, and lots of emerging market prop trading. And it's not trying to build up a really big investment bank. This is focused, small, and as result, should be easier to see some kind of success come through. Thank you very much, Antony, for that. We'll have more Breakingviews for you tomorrow