US-based management consulting firm, Alvarez & Marsal (A&M), has announced the addition of 40 executives from EY to its global transaction advisory group (TAG), as it prepares for a pick-up in private equity (PE) activity after a sullen 2022.
This will be driven by increased investor confidence in China’s economic recovery following its relaxation of Covid-19 travel restrictions, explained Shanghai-based Stella Yuan, managing director and co-leader of the TAG for Asia at A&M. Yuan was one of those to move to A&M from EY at the start of 2023, following 15 years of service at the firm. There, she was most recently Greater China PE leader and transaction diligence leader.
“The firm’s decision to significantly expand in China is based on its long-term vision of the country. Despite geo-political tensions between the US and China, China is still the largest trading partner to many major economies. Besides, we are a strong believer in China’s growth story, and investment in talent is also our firm’s long-term mission,” Yuan told FinanceAsia.
Including Yuan, eight former EY veterans have joined as managing directors: Kevin Gu, Runald Li, Stella Ni, Tim Wang, Lingfen Wu, Bonnie Xin, and Jimmy Zhou. In addition, A&M has appointed 32 practitioners since April 2022.
In terms of outlook, Yuan believes it to be unlikely that PE volumes will reach record 2021 levels, but expects to see PE firms making larger control deals, and to increase their focus on post-deal value creation.
According to research by Bain & Co, PE deal value in APAC reached $296 billion in 2021, breaking the $198 billion record set the previous year.
She also noted that those targets with strong profitability and demonstrable ability to generate cash flow will be more attractive compared to those with high-growth stories. In terms of sectors that will drive activity, the A&M team is bullish on business service, advanced manufacturing, and broad healthcare, she explained.
“Consumer and retail will benefit from the unwinding of Covid-19 restrictions in 2023, but will take more time for recovery, and the business model might need to be retested for post-Covid consumer behaviour changes,” she added.
Since then, PE firms have reduced consumer investment teams, which might also contribute to lower deal activity in consumer and retail sectors, Yuan explained. She added that investors are also more mindful of ESG risks now, than ever before.
Against the tide
The latest announcement is the firm’s largest hiring spree since January 2022, when A&M hired 50 new digital services professionals and eight managing directors from EY in Spain.
Media has reported that EY is looking at cost-cutting measures ahead of the break-up of its audit and consulting businesses. More recently, the same outlet reported on EY Germany’s plans to cut 40 partners and 380 staff in the wake of the Wirecard scandal.
Meanwhile, peer, KPMG, last week announced internally that it plans to cut 2% of US staff, or around 700 people.
Following the addition of the recent recruits, A&M counts 400 staff across Greater China, Southeast Asia and Australia, of which approximately 100 belong to the TAG practice. A&M has approximately 200 staff in Greater China (mainland China and Hong Kong) in total.
Besides China, activity in Australia and Southeast Asia – particularly Indonesia and Vietnam – will be the main drivers of the firm’s transaction advisory business this year, Yuan concluded.