BrazilM&A director Chloe Chan discusses Tricor's largest acquisition to date
Following the Asia-based business advisory’s largest acquisition to date – Richful Deyong – Tricor's Group Head of Merger and Acquisition Chloe Chan speaks with Consultancy.asia on the firm’s latest transaction and the general M&A landscape.
Recently, Tricor Group, a Hong Kong-headquartered professional services firm founded nearly two decades ago and now boasting a global presence across 21 countries and territories, made its sixth and largest acquisition to date; that of Richful Deyong (RFDY), a business service provider with a team of over 200 experienced professionals – who last year supported the internationalisation of over 18,000 Chinese corporations.
“We are delighted with the greatly enhanced presence that we have gained in China through RFDY. Shisong Mai, the founder of RFDY, and his management team have built an exceptional business in the mainland and Hong Kong. Combining RFDY’s capabilities with the resources of Tricor strengthens Tricor’s Asian footprint and supports our aim to become the premier partner for China’s globalisation activities,” said Tricor Group CEO Lennard Yong of the deal.
With expansion firmly on its mind, the firm toward the end of last year recruited former Deloitte Partner in M&A advisory, Chloe Chan, as its Head of Merger and Acquisition. Chan spoke to Consultancy.asia.
Before joining Tricor, you spent ten years altogether between KPMG and Deloitte. Can you tell us briefly how you have found the transition from the Big Four to Tricor and an in-house M&A role?
Chan: Working at the Big Four provided me with the opportunity to work with the C-suite and top management of many different international and global companies in their cross-border investments. The projects are truly interesting and challenging, and diverse in various aspects e.g. geography, industry, deal rationale, and strategy. But, whilst I have enjoyed every moment of the last decade working as a consultant, working in the Big Four also means that my involvement in a particular transaction could be limited to the scope and timeframe of the project.
As Head of Merger and Acquisition at Tricor, I have to lead the M&A initiative, and am 100 percent responsible for the results. I have to think about the strategic and cultural fit of the target and the implications to our business. I also have to work with different business functions to design the post-acquisition business and operating model, for example how to merge the sales forces and incentivise them and how to design the service delivery model. This is truly not easy as our business and the external environment are highly dynamic and we have to react quickly to seize opportunities and manage risks.
Tricor’s purchase of Richful Deyong was the firm’s largest to date. Could you walk us through the deal and thoughts to integration?
Chan: The acquisition of Richful Deyong is an exceedingly important milestone for Tricor and further accelerates our China outbound business. We are all delighted that this transaction has come to a promising conclusion for both sides.
This deal is not just about running the deal process – doing the numbers, the negotiations and the SPAs (sales and purchase agreements). If we just focused on these steps, this M&A would certainly fail. What is the most critical success factor of this transaction is to establish trust and rapport between the two management teams, to establish a strong partnership and to align the vision with the execution actions that drive business growth.
Signing the deal is an important step, however it does not mean this deal is finalised. We need to make sure that resources and plans are in place to fully implement a smooth integration. We have to ensure that both teams are able to function and collaborate together in the new working environment to fully maximise growth and synergy.
Usually such a purchase would have a lengthy build-up – how far progressed were the negotiations when you joined Tricor, and did coming onboard at a later stage create any challenges as a project leader?
Chan: We were at a very early stage engaging with the company when I joined Tricor so I have been involved in the entire lifecycle of this transaction. Whilst I lead the project effort as the practice leader, I would like to also emphasise the teamwork involved. We work as a team to drum up support to fully assess and develop a plan for future business growth, expansion and synergies throughout the process - for example, commercial teams to drive sales, marketing and communication teams to drive branding and PR, and IT staff to support platform consolidation and technology transfer. This could not be done by our M&A team alone.
More broadly, can you elaborate on the general strategic aspects of any M&A deal? Tricor operates in 48 cities* across 21 countries and territories. Does this lead to additional considerations?
Chan: I would say that our M&A strategy is not only to focus on negotiating the deal price, as most people would think. Needless to say that is an important aspect of the deal to get the price right, but making strategic concessions are often necessary. It is important for cross-border M&As to have a more holistic view towards legal, staffing and cultural diversity, especially for deals affecting international expansion.
According to an analysis from Bain & Company, the M&A market is currently running hot, but with greater competition and record levels of dry powder organisations are saying that finding value in the market is becoming increasingly difficult. Do you agree, and how then do you cut through in such a landscape?
Chan: When the M&A market is hot, it usually becomes more difficult to find rightly priced assets as the competition for good assets is fierce, especially in the Asian market where growth is strong and capital is abundant. Business owners sometimes, however, do not just look at the price that an investor would offer, but also pay attention to other factors – for example, strategy fit, culture fit, or perhaps simply whether it is the person who they want to work with. Having a longer-term vision with a focus on value creation, instead of a focus on only short-term gains from financial engineering and cost-cutting is critical. Building trust with the counterpart throughout the negotiation process can allow one to excel in this competition.
A recent analysis from PwC noted the poor success rate for M&As, finding that successful deals depend on long-term plans with a focus on value creation from day one. What are your perspectives on the factors for successful M&As and subsequent integrations?
Chan: Having advised on over 120 M&A transactions as a consultant in the past decade, and more recently as the practice leader at Tricor, I would agree that a long-term plan with a focus on value creation along with the retention of key staff are important factors for successful M&As. However, developing a comprehensive plan with a lot of action items is not difficult. The really challenging part, and the one where most companies fail, is to align the vision of all stakeholders to work towards the same goal.
Some of the M&As I have seen before have very aggressive post-deal integration and synergy plans – sometimes purely focused on the maths to justify a higher pricing multiple, and perhaps without engaging the business and gaining the buy-in of all supporting functions. A truly successful M&A is like rowing a boat, if one-third of the team rows forward and the rest rows backwards, you don’t advance but go backwards.
How do you avoid the hidden risks of an M&A?
Chan: Getting the best of both worlds – and for both worlds – is very important in staying one step ahead of not just your M&A counterparts, but also ahead of market conditions. Understanding the growth drivers of the company – whether it is external market factors (e.g. growing market demand, government initiatives) or internal factors (e.g. management team capabilities, operation efficiency) – and how these drivers may change and interact with each other in the future and with the external market and regulatory environment can allow us to identify and develop plans to mitigate any hidden risks in the business.
Lastly, any negotiation tips for future buyers/sellers?
Chan: Skillful negotiation is indeed key to getting the deals done. Both buyers and sellers should find out what the top priorities are for the other side, allowing both sides to ultimately make concessions to the other to keep the deal moving forward. While they often see themselves as seated at two polar points, there is one critical business goal to achieve together: getting the deal done.
*The integration of Richful Deyong has seen Tricor expand its operations from five mainland Chinese cities (Beijing, Shanghai, Shenzhen, Guangzhou, and Chengdu) to eight additional locations – Tianjin, Xiamen, Dalian, Qingdao, Nanjing, Hangzhou, Fuzhou, and Ningbo.
