James Dubow, former chief financial officer of Meiya Power, has re-joined Alvarez & Marsal (A&M) in Hong Kong as a managing director after a five-year stint at the Chinese power company.
A&M is a professional services firm that specialises in working alongside private equity firms and other investors and creditors to advise on post-investment performance improvement and turnaround management. Dubow left the firm in 2007 to become the full-time CFO at Meiya Power after two private equity investors, Standard Chartered and Noonday Asset Management, bought the company.
He helped the company develop its growth strategy after the acquisition, prepared the company for listing in Hong Kong and then helped with the 100% equity sale to China Guangdong Nuclear Power, a major state-owned corporation, in November 2010. He spent the past year leading the financial function while assisting the new parent company with its strategic plans and post-merger integration. During his time at Meiya, he raised US$1.1 billion of corporate debt in addition to helping with the financing for several projects.
“We’re excited to have Jim back on board; he’s got a fabulous background,” said Oliver Stratton, managing director and co-head of A&M in Asia, in a phone interview with FinanceAsia. “Last year, our focus was on expanding our presence. We now want to add more experience on the finance side, which is why we targeted to get Jim on board. He worked with us for seven years before and has spent 15 years working in China, so he adds hugely to our expertise and is providing leadership to the business.”
Conditions are improving for turnaround specialists in Asia, and particularly China. International private equity firms have been busy expanding their portfolios into the mainland during the past few years and the worsening outlook means that many are now paying even closer attention to performance. At the same time, the opportunities for bank funding are drying up as lenders become more selective.
“Weaker growth is accelerating the demand for our services but the opportunity has been there for some time,” said Dubow. “The biggest need in China is management expertise. It can be very hard to find and recruit good talent.”
Another issue, of course, is the noise created by Muddy Waters and other short-sellers, which have made a series of allegations about Chinese companies that made reverse takeovers to win listings in the US.
“In some instances those allegations have put companies into distressed situations and made clients worry about investments they had already made,” said Stratton. “The level of due diligence has been pushed up to the extent that we can bring A&M’s unique skills to the table.”
Those skills vary depending on the situation. Dubow often focuses on underperforming and distressed companies, where the kind of advice that A&M provides can cover the whole business.
“Performance improvement is increasing or improving the quality of cashflow,” he said. “The first thing I look at is the quality of the people, then the second is reporting and financial controls, to make sure people have the information they need to make decisions.”
A&M also has specialists who look at supply chains — factory floors, inventories and so on — as well as top line issues such as pricing, sales channels, margins, which products are profitable and so on. The service even extends to capital structure and financing in some cases.
However, such a holistic approach tends to be needed only in extreme circumstances. Stratton tends to focus on healthier companies that are looking for more specific help.
“In the case of a PE with a minority stake in a Chinese business, the investors typically have to work closely with the entrepreneur and therefore may have to be more selective in where they focus their efforts in deploying A&M to add value,” said Stratton. “We consistently see opportunities in supply chains and operations, and in the current environment of slower market growth, top line growth in the form of revenue enhancement is often a priority — you can add value pretty quickly and it’s not as intrusive on the company.”
Such solutions are particularly popular among Chinese entrepreneurs, who are not always happy to open their books at the urging of a foreign, minority investor. Making their supply chains work better is much less painless.
The firm is also focused on extending its client base beyond private equity into the Chinese corporate sector directly, where it perceives a need for advice as local companies become increasingly acquisitive.
