TOKYO, Japan — Sumitomo Mitsui Financial Group of Japan will invest over 42 billion yen ($380 million) in Jefferies Financial Group of the United States, according to Nikkei on Wednesday. Because of the country’s dynamic climate for mergers and acquisitions as well as financing, SMFG intends to expand its securities business in the United States. It will also focus on connecting Japanese businesses with peers in other countries. The acquisition will be announced soon by both companies. Sumitomo Mitsui Banking Corporation, a subsidiary of SMFG, will buy Jefferies’ stock on the open market. Jefferies is a securities-based financial holding firm that focuses primarily on serving enterprises. It was founded in 1962. Investment banking, including as M&A consulting services, accounts for the majority of company income. Jefferies reported approximately $6.9 billion in sales and $770 million in net profits for the fiscal year ending November 2020. According to Dealogic, the company’s investment banking unit in the United States generated $1.75 billion in 2020, putting it in eighth place among global financial institutions. Jefferies has specialized bankers in more than 80 industries, with a strong presence among midsized businesses valued at less than $1 billion and with less credit than larger competitors. As a result of the COVID-19 problem, corporate restructuring is on the rise in the United States, and financing through the issuing of stocks and bonds is also on the rise. Jefferies will source M&A and financing deals in the United States, while SMBC will offer funding. The two will also improve cross-border M&A advice services. In 2020, SMBC Nikko Securities, an SMFG affiliate, collaborated with Jefferies for U.S. equity research. Both will promote international M&As involving Japanese corporations in the investment banking area. In 1986, SMFG invested in Goldman Sachs, and in 2008, it invested around 106 billion yen in Barclays, a British bank. The financing partnership between SMFG and Goldman Sachs has dissolved, leaving the company with no stakes in American financial institutions. SMFG has struggled to strengthen corporate industries such as investment banking in the United States, which has the world’s largest financial market. Due to low loan rates and a shrinking population, Japan’s domestic market continues to decline, leaving little profit chances. As a result, SMFG announced initiatives to enhance its global business earlier this year. During the four months of April to July, it planned to invest in or buy non-banks in Vietnam and India, as well as a bank in the Philippines. During the 2008 Lehman Brothers bankruptcy, Japanese banks gave capital assistance to US financial firms. Mitsubishi UFJ Financial Group invested $9 billion in Morgan Stanley, while Mizuho Financial Group paid around 130 billion yen for preferred stock in Bank of America. In 2015, Mizuho FG sold all of its stock./n
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