AT Kearney, the US-based consultancy, is looking to solidify and expand its footprint in the Middle East and is open to acquisitions or partnerships to better serve its regional clients, its managing partner and chairman said on Sunday.
"It [The Middle East] is one of our fastest growing regions in terms of revenues, in terms of people and in terms of breadth and quality of our client relationships," Alex Liu, who took over the helm of the company in March told The National in an interview in Dubai. "I see no reason why we can't continue to be growing [regional operations] at a very fast rate."
Saudi Arabia, the world’s biggest oil exporter and the top Arab economy, is the “hot spot” for AT kearney and other global consulting players as the kingdom goes through unprecedented change. The firm, which maintains a presence in every country in the Middle East, is looking to enhance its capabilities to tap business opportunities available in the region, especially in Arabian Gulf states, where economic transformation sits on top of government agendas, he said.
One way of achieving that objective is through acquisitions of other consulting firms.
“I would say yes if there is a pocket of capability that make sense,” Mr Liu said, in reply to a question about potential acquisitons. “Clients need deep delivery. They want new and innovative approaches ….. some times we may not have all the capabilities so you either build it organically, [or] you acquire or partner with people to provide [it].”
AT Kearney had entertained a possible merger with rival Booz & Co in 2010, but talks failed. Booz was later acquired in 2014 by PwC and rebranded as Strategy&.
The energy-rich economies in the wider Middle East, particularly those in the GCC, which accounts for about a third of the world’s proven crude reserves, are trying to reduce their dependence on oil revenues and radically transform their sources of income by developing local non-oil industries.
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A fall in oil prices from the mid-2014 peak of $115 per barrel to below $30 a barrel in the first quarter of 2016 has forced privatisation of sectors such as health and education. Partial sale of state-owned entities, including companies such as Saudi Aramco, the world's biggest oil producer, are also part of the economic agenda as both government sand the private sector realign priorities according to new business realities in the lower oil price era.
Implementation of policies to bring about social and cultural changes including encouraging women’s participation in the economic activities are also afoot, opening new avenues of business for global consulting firms like AT Kearney.
Mr Liu said it is the right time to invest and expand in the region as national-building initiatives continue to provide incentive for such a move.
“We have typically invested ahead of demand in the market place so we have been here in the Middle East for quite some time,” he said. “I have a long-term bullish view of this market. We will continue to implement business plans that are consistent with that view point.”
The company currently serves the region through 300 personnel and assistance from teams from other regions. It is looking to hire more staff as business continues to boom, Gael Rouilloux, a partner at AT Kearney Middle East said.
“The only limit to our growth is the access to talent. The market is booming be it on the corporate side or government,” he said.
AT Kearney’s current client mix in the region is a “pretty good” balance of both private sector companies and government entities. The firm is working with some of the major companies in the region in telecommunications, oil and gas, utilities, renewables and petrochemicals sectors. It is also actively working with the governments on policy formulation and implementation projects, he noted.
AT Kearney has recently restructured its Middle East business, adding Africa to regional operations, Mr Liu noted.
“We have expanded the ambitions for the region to include Africa. It’s a different market but we have experience of working there,” he said. “We have a great deal of market knowledge and over time we will expand our footprint [in the continent] to reflect the need for more coverage.”
Water waste
In the UAE’s arid climate, small shrubs, bushes and flower beds usually require about six litres of water per square metre, daily. That increases to 12 litres per square metre a day for small trees, and 300 litres for palm trees.
Horticulturists suggest the best time for watering is before 8am or after 6pm, when water won't be dried up by the sun.
A global report published by the Water Resources Institute in August, ranked the UAE 10th out of 164 nations where water supplies are most stretched.
The Emirates is the world’s third largest per capita water consumer after the US and Canada.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
