Weisel, Nomura Owe Thanks to Recruiter for Intro –

The recently announced alliance between Thomas Weisel Partners and Nomura Holding America Inc. is in part the handiwork of the least likely of Street players an executive recruiter.

In what could be a first-of-its-kind role for a recruiter in financial services, Russ Gerson decided that it made sense for two of his clients, Nomura and Thomas Weisel, to explore the possibility of doing business together. He knew that Thomas Weisel Partners was looking for international capabilities, while Nomura was looking at merger and acquisition business in the U.S. Both had been looking at strategic opportunities and talking with a variety of companies.

Gerson, who is the head of the global financial markets practice for A.T. Kearney, brought the idea to the attention of Joe Schmuckler, the chief operating officer of Nomura Holding, and Atsushi Yoshikawa, its chief executive. Nomura Holding is the holding company for Nomura’s North American investment banking and securities businesses. Both men thought the idea worth discussing.

Once Nomura signed on, Gerson called up Thomas Weisel, who was interested, and so Weisel and Nomura’s Schmuckler met for the first time at an Empower America conference held in Vail, Colo., in August 2000. Weisel is a director of Empower America, a conservative think tank focused on tax, educational and social security reform. Schmuckler had just begun a term as a director of the organization, and matchmaker Gerson is a longtime member of its advisory board.

The idea passed muster, and in October top executives of Nomura visited Weisel’s offices. From there, executives at the two banks began vigorously exploring the idea of working together, as Schmuckler and Weisel COO Blake Jorgensen began talking daily.

Although unusual, Gerson’s role in the deal made logical sense, as the executives said that good recruiters who work closely with their clients and become very aware of their strategies are in a position to make suggestions and facilitate introductions. “Russ got to know us well, and he knew the type of partner and some of the things we would be interested in,” Jorgensen said. “He helped drive an introduction to some of the senior Nomura people both here and in Japan.”

Those introductions proved to be very important. “His role was very useful in the beginning to help both sides feel comfortable about who the other was and shepherding the discussion,” said Nomura’s Schmuckler.

For Gerson, it was a natural extension of what he does as a recruiter when he helps companies plot their strategies. “I have always taken a strategic approach to my recruiting, but to be able to take it to the next step and help advance the business is very rewarding,” he said.

Ultimately, Nomura purchased a 3.75% stake in Weisel’s business by making a $75 million investment in Weisel. Nomura also pledged $125 million of its own money to invest in Weisel’s private equity initiatives, while pledging to raise up to $500 million for Weisel’s private equity funds. The investment valued Weisel at $2 billion, compared with $1 billion when it sold a 10% stake to U.S. pension fund CalPERS in 2000.

The deal gave both firms access to additional markets and business opportunities, without having to expend a great deal of cash, which is a crucial consideration in this environment of shrinking revenues. For the first nine months of 2001, Weisel’s revenue fell 32% compared with the same period in 2000. Through its deal with Nomura, Weisel received a cash infusion and doubled its valuation. The deal also gave it a base in Asia, where troubled Japanese companies likely will be looking to sell off subsidiaries.

Nomura, which is a top player in Japan, operates in a market that is affected by Japan’s long-standing economic troubles and that has come under increasing competition from U.S. investment banks. As possible relief, the deal gives Nomura an entree into the U.S. merger business and private equity investing.

Initially, the alliance will focus on developing M&A business in technology, along with media and telecom, health care, business services and consumer companies. Both firms plan to place employees at each other’s firm. Initially, less than five Nomura employees will be stationed at Thomas Weisel’s offices. Plans are still being formed about how many Weisel employees will be stationed at Nomura’s headquarters.

A New Trend?

Gerson’s achievement of almost single-handedly midwifing the deal is an extremely rare feat for a recruiter, whose role is usually to help teams of as large as 50 employees to move to another firm. Yet making the leap between recruiting and matching up two organizations isn’t too difficult. “Search is not terribly different from M&A,” Gerson said. “A recruiter represents a client, who is similar to an acquirer, or a candidate who is similar to a seller. The disciplines that go into executive recruiting, with the exception of financial analysis and due diligence, are not that different than those that go into the M&A process.”

Others echoed similar sentiments. “Clearly a recruiter can do much more than just take people and move them around. Being in a marketplace allows you to pick up business trends as well as identify issues and opportunities and that lets you counsel clients well beyond just finding an human being,” said Andrea de Cholnoky, senior director and co-head of global securities and wholesale banking practice at Spencer Stuart.

And as Wall Street layoffs become commonplace, recruiters could become even more valuable to large firms, as some of the hordes of dislocated workers may start boutique firms. These firms likely could catch the attention of their larger counterparts who have sufficient capital but who are trying to increase profitability, creating situations similar to the Nomura-Weisel alliance situations where a recruiter can prove a valuable matchmaker.

“This could well happen with increasing frequency,” said Georges Holzberger, managing director at TMP Worldwide Executive Search.