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Cl m2010-1 round-businessstorm
 

Cl m2010-1 round-businessstorm

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    Cl m2010-1 round-businessstorm Cl m2010-1 round-businessstorm Presentation Transcript

    • Accenture in Russia: A Strategy Moscow, 2010
    • Accenture: strategic markets The PURPOSE : enter Russian consulting market and grow to a $100 million management consulting business in terms of revenue by 2020 (for Accenture global strategy, see Appendix 1 ). It is better for Accenture to concentrate in development in the groups of Communications and High Tech , Financial Services and Resources . Resourses Market is one of the strategic directions of Accenture. This segment provided Accenture with the higher revenue than the other groups. Public and Health service is the least profitable group in Accenture’s activity. According to the global strategy of Accenture it can help reinvent the industry Accenture has a strong information technology and systems focus. A good o pportunity to enter the Russian under-penetrated IT Market What Accenture can offer Slight increase to the Pre-crisis level. It still the most Lucrative market. The market of Products dropped. The pre - crisis growth rates are impossible to reach . Public institutions of this segment are financed by the government not enough. Services of private companies will hardly be paid well. This market c ontr a cted by 40 - 60%, so the banks and other financial i nstitutions desperately need advice about how to overcome the crisis . Boom on Russian IT - market Opportunities in Russia ( Appendix 3 ) Resources Products Health and Public Service Financial services Communications and High Tech Operating groups and Industry groups ( Appendix 2 )  
    • Segmentation of the Russian consulting world (for features of the matrix, see Appendix 4 ) Period of time, years Price of the order, thousands dollars Number of staff 20 100
      • BIG FOUR :
      • PricewaterhouseCooper s
      • D eloitte&Touche
      • Ernst&Young
      • KPMG
      • Specialized « West » consulting firms , delivering services to Russian clients :
      • McKinsey&CoWard
      • Howell International
      Specialized « West » consulting firms , delivering services to international clients, performing on Russian market : A.T. Kearney, The Boston Consulting Group, Carana Corporation, Arthur D. Little, Roland Berger, Bain
      • Diversified Russian organizations :
      • BDO
      • Business Systems Development
      • Top-audit
      • Finexpertiza
      • Specialized Russian organizations :
      • Rus-audit
      • IBS
      • NP Consult
      • Group INEC
      • Russian Boutique firms
      • PRO-INVEST CONSULTING
      • Consulting department of Nicoil Bank
      • National agency of assessment and consulting
      Small Diversified Russian organizations Small Specialized Russian consulting organizations Small regional Russian consulting organizations Less than 10 From 10 to 20 More than 50 150 1200 0 60 15
    • Russian market entry strategy
      • Russian consulting market has contracted because of the crisis by 17 % ( Appendix 5 )
      • The market is inflexibly segmented
      In near future - no space for one more consulting company
      • In Russia in 50 % of cases personal contacts help to be hired as a consulting company (tender is used only in the rest 50% of cases )
      • Successful Russian companies work in the market for more than 10 years, so they have valuable client databases . It will be hard for a "newcomer" to entice away the prospective clients
      • The peculiarities of Russian way of doing business are known only to the companies who have enough experience in this field, and are not obvious for a "newcomer"
      It's better to break into the Russian market not by themselves, but through a successful consulting company , who has already gained its market share, client database and expertise Alliance, merger or acquisition? Acquisition , because Accenture's purpose is to work on the Russian market under their brand name
    • Choosing a potential target company
      • As a target company we should consider the companies, which are in the second line in the matrix of market.
      • The companies that are leading players could be viewed as complex systems, they will be reluctant to reduce their market share.
      • The rest of the companies are quite small in their size, thus they will never help Accenture to enter the Russian market.
      Only BDO will pass the $100M mark (  3 bln.rub.)  2 049 8 50 1452668 Metallurgy , resources, public administration Mechel, Rosneft, RF Ministry of Defence Finexpertiza Top-audit Business Systems Development BDO-Russia For entry criteria see Appendix 6 Mosenergo, Transneft, Russian Post RF Ministry of Finance, Russian Railways, Т N К-BP LUKOIL , MTS, Sberbank Major clients 2 085 416 2 580 790 3 308 88 2 Estimated revenue from consulting per year by 2020 (thousands of roubles) ( Appendix 7 ) 1 523 605 1759522 2 563 1 60 Revenue from consulting, 2009 (thousands of roubles) Energy, resources, communications Public administration, transport, resources Energy, communications and high-tech, financial sector Major industries
    • Acquisition of BDO-Russia (the consulting department)
      • Why BDO? See Appendix 8
      • Step 1 : Business valuation
      • B2b service companies are usually valuated as 5-7 EBITDA, but as we are short of information we will assess BDO’s consulting business as it often done for consulting companies – value ~ annual turnover.
      • I.e. BDO’s consulting department value ~ RUR2309,08M ( ~$74,486M ) as the average revenues for the past 3 years and the prognosed revenue for 2010. As the average profitability for the consulting companies in Russia is 20-23%, the payback period will be about only 5 years ( Appendix 9 ).
      • Step 2: Financing
      • Acquisitions are usually financed by business loans. Accenture can apply for loan in its servicing bank or for a specific acquisition loan, e.g. from the Kennedy Funding, Inc. ( Appendix 10 ) that offers a loan for 12-21% per annum up to 10 years.
      • Step 3: Post-acquisition strategy
      • To expand the activities in 3 strategic sectors: Communications and High Tech , Financial Services and Resources .
      • To combine and improve the services and corporate ethics of the Accenture and the former BDO consulting department.
      • To preserve the links with all BDO clients and attract new.
    • Appendixes
    • Appendix 1. Accenture Global Strategy
      • Growth in the core business - significant opportunities and headroom for growth in core management consulting business across all service lines:
          • Customer Relationship Management
          • Finance & Performance Management
          • Process & Innovation Performance
          • Risk Management
          • Increasing shareholder value
          • Supply Chain Management
          • Talent & Organization Performance
      • Growth through new initiatives and businesses
      • Growth through geographic expansion in strategic growth markets of Brazil, India, China, Russia , Mexico and South Korea.
      Back to presentation
    • Appendix 2. Accenture Operating Groups, 2010 Please see next slide
    • All the operating groups perform successfully  Accenture strategic areas will depend only on its opportunities in Russia Back to presentation
    • Appendix 3. Top-400 clients of consulting in Russia – potential Accenture clients? Top-10 clients: Gazprom LUKOIL Rosneft Russian Raliways TNK-BP Transneft S urgutneftegas Norilsk Nickel Vimpelcom Rosenergoatom concern
      • 7 of 10 – Resources & Energy
      • 2 of 10 – Products (transportation services)
      • 1 of 10 – Communications & High-Tech
      The biggest share of sales is in Financial Services Source: case materials Back to presentation
    • Appendix 4. Features of the matrix
      • In the matrix companies compete with each other only across the line .
      • The higher the company on vertical position, the older the company is. However, the opposite approval is wrong.
      • The higher the company on vertical position, the more its services cost .
      Back to presentation
    • Appendix 5. Russian consulting market trends The main reasons of growth of Russian consulting market during « financial crisis » : Russian consulting market in terms of revenue Russian consulting market has huge growth potential For Accenture entering Russian market is really prospective Please see next slide
    • The Survey of the Russian market of consulting in terms of its branches in 2009-2010 Management consulting is the most prospective sphere in the Russian consulting market Accenture should lay special stress on developing management consulting in Russia Back to presentation Source: RA Expert
    • Appendix 6. Choosing a potential target company
      • Criterias:
      • From Top-30 Russian consulting companies (other companies have too little market share, do not generate enough revenue and/or do not have enough expertise )
      • Only management consulting (don't consider IT-consulting, tax consulting etc.)
      • Persistent growth of revenue in 2003-2009
      • Sources of information:
      • Top-100 consulting companies (ratings by Kommersant.Money and Expert, published in 2004-2010)
      • Official websites of the "potential targets"
      Please see next slide
    • The largest consulting group s in Russia in 2009* Back to presentation * Source: RA Expert 12,2 1 523 605 Moscow RSM Top-Audit 18 15 16 901 806 Moscow Rosexpertiza 23 22 − 926 753 Moscow RUFAUDIT − 21 7 1 452 668 Moscow Finexpertiza 13 16 5 1 630 633 Moscow Intercom-Audit 12 14 − 3,2 1 759 522 Moscow Business Systems Development 9 13 30,5 2 168 910 Moscow Energy Consulting Group 11 10 6,7 2 563 60 Moscow BDO -Russia 7 8 2,7 2 762 538 Moscow KPMG − 6 − 8,1 3 209 548 Moscow PricewaterhouseCoopers 3 5 Annual increase in sales (%) S ales from consulting, 2009 (thousands of roubles) Headquarters A udit and consulting group s 2008 2009
    • Appendix 7. Estimation of the revenue in 2020
      • Step 1. Historical analysis
      • Revenue in 2003-2009
      • Step 2 . Prognostication
      • For approximation logarithmic trend is optimal:
      • reliability of approximation coefficient R 2 is 0,83 – 0,89 for all 4 companies
      • it provides conservative estimation of future revenue based on a life - cycle of a company concept
      $100M 3 308 88 2 2 580 790 2 085 416 2 049 8 50 Back to presentation
    • Appendix 8. The advantages of the BDO-Russia’s acqusition
      • For the clients, the BDO brand means a unified approach and consistent quality in any country in which BDO Network has a presence.
      • BDO is a network of independent companies , and not an integrated structure like McKinsey or BCG. Consequently, Accenture can acquire BDO-Russia nearly whithout affecting the interests of BDO in other countries
      • T he company has been known on the Russian market since 1989 under the Unicon brand .
      • A huge database of loyal and sound clients - m ore than 50% of the clients are on the Top-100 list of the Russian business .
      • First Russian company whose audit opinions are accepted by regulators at three stock exchanges — New York, London and Frankfurt
      • Unique 20 year experience in serving fast-growing Russian companies, including those using international reporting standards, companies of strategic importance, major banks, the state authorities and government corporations
      • Industry specific service offerings and tailored solutions
      • Experience in all prospective sectors : resources & energy (ROSATOM, MOSENERGO , Gazprom , LUKOIL , etc.), communications and high-tech (MTS, Central telegraph, CTC Media , Sony Ericsson , Gazprom-Media Holding ), financial sector (Alfa-bank, VTB Bank , Sberbank and others).
      Back to presentation
      • BDO-Russia has huge growth potential
      • By acquiring BDO-Russia Accenture will achieve its purpose - $100M by 2020
    • Appendix 9 . Assessment of BDO’s value and payback period
      • According to the data* the revenues of BDO-Russia's consulting department were as follows:
      • 2007 – RUR1902,863M
      • 2008 – RUR2393,979M
      • 2009 – RUR2563,160M
      • Prognosis for 2010 – RUR 2376 , 311 M
      • The average revenue ~ RUR2309,08M
      • The net profit doesn’t differ significantly from the net cash flow (due to the low amount of fixed assets and expenses on depreciation/amortisation), so we can assume that NCF ~ Net profit .
      • As the initial expenses of Accenture to acquire BDO ~ annual revenues and in consulting the average return on sales (that equals net profit divided by revenues) is 20-23% the payback period is the inverse function of company’s return on sales .
      • PBP ~ 1/(20-23%) ~ 4,3-5 years
      Back to presentation * Source: RA Expert
    • Appendix 10. Kennedy Funding, Inc
      • Term  - Flexible loan term from 1 to 10 years.  Prepayment  - No prepayment penalties. Use of Proceeds  - Loans are made for business purposes only. Loan to Value  - Loan amounts can be up to 50- 8 5% of the disposition value of the collateral, based on the estimated cash sale price given a 180 day marketing time. Rates  - Rates vary from 12-21% per annum, interest only, depending upon collateral and loan structure. Size of Loan  - From $1 Million to $100+ Million nationally. Must be at least $5 Million  for international loans. Collateral  - Real estate and other fixed or liquid assets.
      Back to presentation Today, Kennedy Funding is actively seeking new funding opportunities throughout the world. With free enterprise on the rise everywhere, they hope to fill an important role in helping companies of all sizes to achieve their goals. The program has been providing lightning-fast service and creative funding solutions throughout North America since 1987, and internationally since 1996.
    • Thank You! Our team: Ann Nazarova, Natalia Ulyanova, A yuna D anzanova , Olga Pivovarova Finance University under the Government of the Russian Federation