Alvarez & Marsal adds transaction advisory to Asia services offering

This function - performed by the transaction advisory group (TAG) - has been offered by the company on a global basis for 10 years, initially in the US and Europe. A dedicated transaction advisory service was set up in India in 2013 with the appointment of Vikram Utamsingh, formerly of KPMG.

A&M is expanding the service to the wider Asian market largely due to changes in demand coming out of China. The combination of slowing economic growth and intensified competition has forced PE firms to focus more on operational improvement - before they do deals as well as post-investment. At the same time, Chinese corporations require assistance as they pursue more complex overseas transactions.

A&M has once again hired a KPMG alumnus, with Xuong Liu, who previously worked on financial due diligence for inbound investments, joining the company two months ago. As head of TAG Asia, Liu currently leads a team of six but there are plans to hire additional manpower. A&M as a whole has 50 people covering India and another 50 serving other Asian markets.

"In the US we have developed an approach to due diligence that is highly differentiated - we offer financial due diligence but also operational skills," said Oliver Stratton, co-head of A&M in Asia. "We get involved earlier in the process and help clients understand investments upfront as well as the post-deal element. It is an end-to-end service."

What this means in practical terms is that operations professionals who are normally asked to fix problems within private equity portfolio companies will help investors devise solutions to these problems before any agreements are signed. Stratton notes that issues such as whether a company has too much inventory on the books or products that are out of date are more likely to be identified by an operations professional performing a site visit than through standard financial and risk analysis.

"When dealing with an entrepreneur it is also easier to address these issues up front," he adds. "You need to set a roadmap for the business that includes what is expected from the entrepreneur and the financial commitment from the investor."

A&M typically gets involved with businesses where the private equity investor has a high degree of influence if not outright control. Control transactions in China are increasing from a low base, but the company expects to see more demand from minority investors. For example, a PE firm that invests on the basis of its ability to contribute operational expertise as well as capital might have to support a portfolio company facing an increasingly competitive and global commercial environment.

Private equity accounts for approximately 80% of A&M's business in Asia. The balance is made up of corporate work generated locally or from overseas clients that require support in the region. It is hoped that the introduction of TAG will enable deeper penetration of the Chinese corporate market, particularly in the context of outbound M&A.

"Chinese companies want to become national champions but they also have global aspirations," said Liu. "Ten years ago outbound M&A focused on natural resources. Now it is very much led by the private sector and the rebalancing of the economy towards domestic consumption. They are interested in acquiring complex brands and technologies."

A&M established a presence in Asia in 2003 and has offices in Hong Kong, Beijing, Shanghai, Mumbai and Seoul.

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• Topics
• Advisory
• Greater China
• Buyouts
• Expansion
• M&A
• professional services
• buyout
• Growth capital
• Outbound investment
• China
• Asia
• Alvarez & Marsal