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Consultants reel as M&A advisory business disappears

By Bhupesh Bhandari in New Delhi
December 08, 2008 07:26 IST
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Until a few months back, the sales pitch of management consultants followed a standard pattern: The presentations were short, laden with management jargon, and the customer, mostly mid- to large-scale companies, rarely got a word in. Not any longer. "Then, we spoke 60 per cent of the time; now, we listen 70 per cent of the time. The days are over for template consultancy," says PricewaterhouseCoopers Managing Director Deepak Kapoor.

The economic slowdown, which has come like an avalanche in the last few months, has changed the way the country's top management consultants do business. There are few takers left in the marketplace for their advice on mergers and acquisitions.

But they suddenly find in demand their expertise in the fields of cost optimisation, manpower rationalization, tax planning, and cash flow and supply chain management. Nervous customers, of course, have turned stingy and are demanding more bang for the buck.

Kapoor says the presentations his teams now make to customers are more "engaging".

Ernst & Young has started to hire senior hands with deep sector expertise - people who can engage the customers better. "There is a need to spend much more time with the client," Ernst & Young country managing partner Rajiv Memani says.

In the last few years, most consultancies recorded growth in excess of 35 per cent as the demand for their transaction advisory services stayed high. Money was easy and Indian businessmen got into a race to acquire assets all over the world. Consultants chipped in with advice on financial structuring, due diligence, etc.

With the markets in a tailspin now, the focus of Indian companies has almost overnight shifted from growth and shareholders' value to consolidation. "We find much greater focus on issues like treasury management and how to handle volatility in the markets," says Memani.

Kapoor's advice to companies is to pluck all low-hanging fruit first. "Our consultants now tell people to think smart and do more with less. This is not the time for jingoism, this is the time to go back to the grassroots," he says.

There is new business coming consultants' way, too. KPMG chief operating officer Richard Rekhy says the global meltdown has diverted some global consultancy business to India because of the lower costs here. "A lot of global firms want to use Indian resources now. This will make up for any loss in the transactions business," he says.

The flip side is that transactions advisory has taken a hit and resources need to be re-deployed. "We are doing some deals, though mega-deals are not there," says Rekhy. "Deals are now falling on the last day because valuations have fallen so rapidly."

PwC's Kapoor says there could still be some business in overseas asset purchase, though inbound mergers and acquisitions have almost dried up.

So, will they maintain the growth momentum this year? According to Kapoor, PwC will meet its budgets in the current financial year. KPMG's Rekhy says there could be a slight fall. Memani refuses to talk numbers, though Ernst & Young insiders say the robust growth seen in the last two-three years now looks difficult. Another top consultancy outfit, McKinsey & Co, says it is still assessing the impact of the slowdown and refuses to be drawn into any conversation on the subject.

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Bhupesh Bhandari in New Delhi
Source: source

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