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Managed Solutions Intro for China by The Alta Group


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Jon Fales presented to the China Leasing Summit on Managed Solutions Implications for Captive Vendor Financing in Beijing in June, 2017.

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Managed Solutions Intro for China by The Alta Group

  1. 1. 1 ©2017 The Alta Group, LLC 2017 CHINA LEASING SUMMIT MANAGED SOLUTIONS: IMPLICATIONS FOR CAPTIVE / VENDOR FINANCING Proprietary and Confidential: The Alta Group prepared this information solely for our client: 3rd party use is permitted only with explicit advance permission of The Alta Group Jonathan Fales Director, The Alta Group June 8, 2017
  2. 2. 2 ©2017 The Alta Group, LLC ► Terminology: What Managed Solutions Is ► Why It’s Important and Why It’s Growing ► Risks and Risk Mitigation ► International Considerations Note: Most of this presentation was presented at the ELFA 2017 Equipment Management Conference Agenda
  3. 3. 3 ©2017 The Alta Group, LLC Terminology Clarification • Need one term to describe the concept: Managed Solutions • Deliberate terminology selection to avoid the legal / regulatory / accounting minefield • Must also sharpen the definition or meaning around specific parties, roles and other elements in a Managed Solutions transaction
  4. 4. 4 ©2017 The Alta Group, LLC What is a Managed Solutions Transaction?
  5. 5. 5 ©2017 The Alta Group, LLC What is a Managed Solutions Transaction? (continued)
  6. 6. 6 ©2017 The Alta Group, LLC • The concept of - or market interest in - Managed Solutions is not new • The industry has reached a “tipping point” due to market factors and client demand • Managed Solutions is positioned to make up as much as 20% of industry activity Why is Managed Solutions on the Radar Screen Now?
  7. 7. 7 ©2017 The Alta Group, LLC Managed Solutions – A 30 Year-Old+ Concept Selected Timeline by Equipment Type
  8. 8. 8 ©2017 The Alta Group, LLC ► “Farming as a Service”  EM3 AgriServices, Delhi, India  Agriculture equipment and services on-demand in Madhya Pradesh ► “Energy as a Service”  SparkFund, Washington, D.C.  Project financing for energy efficient products and services • “Buy as a Service” • “Sell as a Service” Examples of New MSTs
  9. 9. 9 ©2017 The Alta Group, LLC How the Model is Evolving
  10. 10. 10 ©2017 The Alta Group, LLC ► Managed Solutions: Evolutionary or Evolutionary?  Published Fall, 2016 by the Equipment Leasing and Finance Foundation  Researched and authored by The Alta Group  Contains extensive research and over 30 interviews with: • Equipment leasing companies – bank, vendor/captive, independent • Service providers • Legal experts • Lender finance providers • Rating agencies ► Ordering Information:  ELFF website:  Search under “Research Research
  11. 11. 11 ©2017 The Alta Group, LLC Managed Solutions: Methodology QUALITATIVEQUANTITATIVE QUANTITATIVE/ QUALITATIVE SYNTHESIS Alta used a number of resources, including the ELFA SEFA report to dimension the MST activity within the equipment leasing and financing industry. Alta interviewed an extensive and varied group of industry participants to address the critical aspects of MST. Interviews covered a range of equipment lessors in the information technology, healthcare, document technology, agriculture, energy, material handling, transportation, lift truck and general commercial equipment sectors. Interview participants included captive, independent and bank lessors as well as funders, rating agencies and service providers. Alta analyzed the data sources and interview findings, overlaid with its own knowledge of MSTs, to reach the Study’s findings and conclusions.
  12. 12. 12 ©2017 The Alta Group, LLC NOT A ONE-SIZE FITS-ALL ALTERNATIVE The Managed Services Continuum Source: “Managed Solutions: Evolutionary or Revolutionary?,” Equipment Leasing & Finance Foundation, 2016.
  13. 13. 13 ©2017 The Alta Group, LLC MST Study Takeaways
  14. 14. 14 ©2017 The Alta Group, LLC Industry Implications
  15. 15. 15 ©2017 The Alta Group, LLC Key Risk and Risk Mitigants
  16. 16. 16 ©2017 The Alta Group, LLC ► Captives and Vendors May Be Best-Positioned to Offer MSTs  Own relationships with service providers and/or end users  Best access to usage history and, therefore, implicit performance risk  Service divisions may be able to underwrite usage and performance risk ► Banks, Independents Have Challenges  Banks: • Frequent lack of direct relationship with service providers, end users • No history of gauging, and pricing for, performance and usage risk • Lack of ability to syndicate usage-based services offerings • Regulatory issues • “Bank footprint” issues  Independents: • Similar issues as banks, but fewer regulatory issues (note: syndication) • Opportunity to participate in MST niches? Captive/Vendor Implications
  17. 17. 17 ©2017 The Alta Group, LLC ► Asia, Latin America  A/NZ: demand in technology, office  In its infancy elsewhere  Several challenges to growth, including credit infrastructure, asset management capabilities, funder appetite ► Europe  Strong demand in healthcare, technology, construction equipment  Management across country borders poses a challenge, particularly legal and language International Implications
  18. 18. 18 ©2017 The Alta Group, LLC Questions?
  19. 19. 19 ©2017 The Alta Group, LLC Jonathan L. Fales Director The Alta Group +1 (423) 967-8871