In the evolution of industry, the first to arrive are the greenfield businesses, followed by the banks and critical support services, then finally the greater universe of value-added and other non-core auxiliary services. The business of corporate treasury in Asia has followed a similar evolution and the signals now indicate that the industry might finally be reaching maturity.
PMC Treasury, a London-based treasury and risk management consultancy that works with buyers of treasury products to ensure they are getting the best bang for their buck, will officially open its first Asia-Pacific office in Hong Kong on June 1. Mark Bobek will be managing director of Asia for the firm, reporting to Michael Pearce, managing director and founder of PMC Treasury.
"Our opening signals maturity coming to the [treasury] market in Asia," said Pearce who was in Hong Kong meeting with potential clients and otherwise preparing for the opening. He said that, after five-weeks of introductions, the firm had already signed two clients and a third was pending.
One of those clients is the private equity firm CVC Capital Partners who appointed PMC to help with the sale of Malaysia-based Paperbox to Japan-based Oji Paper. The firm bought the paper and corrugated board manufacturer from Genting in 2007 for M$745 million ($224 million at current exchange rates).
According to Pearce, PMC was able to save CVC "several hundred thousand dollars" in the sale by ensuring it received the accurate treasury pricing for Paperbox from financial institutions. He added that this makes both his client and the financial institutions involved happy because everyone knows they got a fair deal.
Of course "mature" is a bit of a misnomer. Many multinational corporations and large local corporates in Asia have, for the most part, already adopted treasury strategies or work within the structures laid out by their global headquarters. Treasury's position as a critical part of the finance functions at these firms is well accepted. However, there are still millions of small and medium-sized enterprises in Asia that are now just beginning to adopt cash management tools; in China alone, treasury revenue at banks is expected to grow by 30% annually according to Celent.
PMC specialises in two types of consulting services: transactional, including pre- and post-deal assessment; and operational management. Bobek explained that the transactional side of the business includes everything from evaluating currency, interest rate and hedging risks, to deal-related reviews for private equity and corporate clients. The operational review includes providing consulting services to customers on how they can implement or improve their treasury.
"After we do the risk management part of a deal for a customer, the doors open," said Pearce. "People go 'now we understand' and the operational review side of our business picks up." He estimated the revenue split between the transactional and operational sides of the business was currently 55% to 45%.
PMC's team, mostly former treasurers or finance executives, provide services to clients out of offices in London and New York. A unique aspect of the firm's structure is the 'PMC Panel' -- consisting of eight former accountants, bankers, chief financial officers, private equity specialists and treasurers -- that it taps for their advice and expertise on a case-by-case basis.
In terms of Asia strategy, Pearce said that the firm anticipates the majority of its business to come initially from Hong Kong, Singapore and Australia. "If China happens for us that will be a bonus," he said.
With much of PMC's initial business stemming from deals, Hong Kong is certainly the logical place to set-up shop in Asia as many of the region's private equity and other deals tend to involve bankers in the city at some point during the transaction.
