Most of Nitin’s career has been involved with business model changes around disruptive technologies and M&A work in the TMT sector for companies around Silicon Valley. He has developed M&A strategies, conducted commercial/operational/technical due diligence and has assisted with M&A integrations and separations for his clients. He specialises in creating value from emerging technologies and helping his clients prepare and adapt to the next big thing. A veteran with over 1,000 transactions, he specialises in revenue synergies and has also led dozens of cost-focused consolidation M&A deals. His recent work includes helping CEOs, boards, investors and business leaders transform their business models by leveraging disruptive trends and M&A to pivot into new business models, utilising technologies such as SaaS, SDN, blockchain, open source, AI, IoT, AR/VR, drones and voice-enabled devices.

“As a Silicon Valley insider for two decades, it is a fascinating challenge to utilise my business knowledge, network of experts, consulting skills and experience in M&A deals to solve problems at the cutting edge of new technologies”, says Nitin. “I have built an expansive network in Silicon Valley with TMT sector clients who look to me to help them through difficult business changes, serving as both a trusted adviser and personal advocate.”

 What are the current key business and technology trends within the TMT sector?

I believe that today we are experiencing the equivalent of tectonic shifts in business that are primarily technology-driven and are impacting the fundamental ways we do business – and these trends extend far beyond the technology sector. These shifts can conflict with each other, making business strategy more difficult to conceptualise and execute today than it was in the past. Some of these shifts are as follows:

• Product to cloud vs. cloud to edge;
• Centralise (SDN/NFV) vs. decentralise (e.g., blockchain);
• Players who monetised voice are now monetising data (e.g., telcos), while those who monetised data are now monetising voice (e.g., Google, Amazon);
• Brick-and-mortar stores to an omni-channel retail economy, or ‘bricks-and clicks’;
• Closed-source to open-source (Android);
• Human to machine (AI);
• Real to virtual (AR/VR); and
• Building traditional enterprises vs. monetising ecosystems.

Each of these shifts is a transformation that presents an opportunity to get ahead of the game.

There are few absolute rules in this new frontier – companies need a data-driven approach to navigate the complexity, uncertainty and ambiguity, which has become profound over the last few years and is not likely to abate.

Traditionally, technology has served to enable or enhance existing business models or to create entirely new ones. More recently, we find ourselves in a place where there is a developed technology, but the ecosystems and business models around it are taking longer to evolve. Take, for instance, blockchain – here we have a viable technology, but it will take a few years to build scalable business models around it and monetise it. CEOs and corporate think tanks must devise new ways of adapting in such a landscape.

I have built an expansive network in Silicon Valley with TMT sector clients who look to me to help them through difficult business changes, serving as both a trusted adviser and personal advocate.

How is FTI positioned to take advantage of these so-called shifts and disruptions in the market?

FTI is configured differently than traditional consulting firms because we have an expert-centric approach to creating value for our clients. Most of our practitioners have deep industry experience, having operated businesses as executives and in consulting for several years, which has created a lot of credibility with clients and other executives. We are also an industry- and sector-oriented firm and taking a profitability view of the business is a highly valued and impactful perspective for our clients. We not only understand the sector, trends and structural shifts, but can also translate those into meaningful operational and tactical outcomes. Our clients tend to hire us for our expertise and experience rather than to simply add leverage to their internal teams. Given the highly sector-focused approach, we tend to formulate points of view on what is coming next, to ensure our clients are well prepared to adapt.

You have quite an amazing M&A background as well. What are key current M&A trends and drivers in the sector?

There is a lot going on in the M&A world. The last two years have been record-breaking, with unprecedented deal activity across industries, geographies, private equity and corporates. While there is some rumbling that M&A is slowing, I think that the big drivers are intact. For one, the US dollar has appreciated significantly against some developing market currencies, and that creates an interesting value discount. The 2017 tax cuts will continue to put more money in the hands of corporates, which will likely fuel M&A activity. The wave around digital business models is not cresting, and companies will acquire or strengthen their capabilities in this space. Incumbents will continue to consolidate to survive and create scale.

All these trends have put pressure on internal M&A teams and external advisers to create more value and to do it quickly. M&A integration has gone through a lot of change, and many professionals have still not adapted to the structural integration aspects and approach it ‘function-by-function’, limiting their ability to create value. There are several industries and sectors where the M&A wave is just starting – the scaling of technologies such as blockchain and AR/VR will attract preemptive strikes from bigger players. Private equity firms continue to be aggressive and are developing some unique strategies for deploying capital and creating value. When you consider all of these trends, I don’t think that M&A activity in the sector will slow down appreciably anytime soon.

The last two years have been record-breaking, with unprecedented deal activity across industries, geographies, private equity and corporates.

How do you go about keeping up with all the trends in the market while continuing to build skills and reinvent yourself?

This is an important aspect that has become critical if you want to stay current, relevant and excel. Learning patterns, adapting and creating value for the entire ecosystem around you is vital when working within this field. Gone are the days when one could read a few books or attend a couple of training sessions to grasp a new subject. Our clients are very smart people and they have access to a vast collection of materials and resources.

The way I have adapted is by learning from my network. For example, I learned about autonomous driving by speaking with approximately 50 companies across the value chain. By the time I spoke with a couple of dozen players, I started seeing patterns and trends that they were not able to see individually, such as partnership opportunities, M&A opportunities, market needs and disruptive trends.

After you’ve networked, it’s about building insights and getting into more details through targeted discussions around specific areas of autonomous driving. Clients value market insights and trends from external sources as validating. I did something similar with blockchain and IoT previously. One can always dress up their credibility with technical credentials, but this is usually less effective than learning from the field and building insights and skills from it. People are also curious about what others are thinking and doing, hence forming a cohesive, defensible, fact-based point of view often goes a long way.

Gone are the days when one could read a few books or attend a couple of training sessions to grasp a new subject.

It is widely believed that you are one of the most connected C-Level Executives in the TMT sector. How have you built such an impressive network?

Great networks are always built over time. It is easy to make connections, but it’s a lot harder to maintain them. I like connecting with people in general and I like exchanging ideas and facilitating with them – be it making introductions, sharing insights, learning from them, advising them or being helpful otherwise. Not all meetings have to be about getting something out of them – be genuine, take interest, help if you can and I guarantee that will deepen your relationships with them. I always tell people that if your relationships are strictly an outcome of your business, then something is not right, but if your business comes to you as a byproduct of your relationships, then you are doing it right. Remember, it is about the quality and strength of your network – not the numbers. It takes a lot of commitment to genuinely foster and maintain a network as it gets bigger. Your network is like a living organism and it needs to be nurtured in order to strengthen and grow. There is not one magical formula for this; everyone has different styles, but it is important to know what works best for you. The crucial element is to put yourself out there in the field.

You have received multiple awards for pioneering new approaches in M&A – please tell us about them.

The most important outcome is to innovate and adapt – awards are only a byproduct of that but, of course, serve as a validation and recognition of your contributions. Some of my work that has been externally recognised is creating a new framework for delivering revenue synergies in M&A, a new approach to managing M&A from strategy through integration by utilising Wargames - a new and unique way to assess blockchain and understand how to unlock its business model value. Additionally, I am currently working on building a new approach to assess and integrate platforms, which requires a different approach from integrating products or processes. When it comes to platforms, the bulk of value created is outside the company and delivered through network effects. Stay tuned for more on this topic.

How does one go about generating new business in today’s world? Has the approach to sales changed?

I think the best way to sell nowadays is to be visible in the right places, share insights and experiences to create a ‘pull effect’. You can no longer just show up and talk about the services your firm offers and wait for the client to bite on something relevant. More specifically, today’s clients judge your expertise by how well you understand their business, trends and context apart from your technical or functional area.

Today’s clients judge your expertise by how well you understand their business, trends and context apart from your technical or functional area.

My field is highly relationship-driven – the deeper you know your topic, the more amplification you will get from the network or relationships in order to get referrals. We don’t live in an age of long attention spans. If you meet the CEO of a company in the elevator, speak about business issues relevant to him. If what you’re saying resonates, you’ll have plenty of opportunities later to talk about how great your firm is.

You also sit on boards of multiple companies – can you tell us about them? How do you choose the companies that you join?  

Foremost, I need to genuinely believe in what the company does and that I can really add value. I am always happy to help talented people with my ideas, skills or network. A great idea is unlikely to succeed without great management teams, and resonating with these people is a key consideration for investing time.

I’m also attracted to disruptive technologies that could have a big impact on the business world. Some of the companies that I am a board member of include Pronto, a partner orchestration and automation platform; SmartBeings, an AI based smart speaker focused on enterprises; and Crosby, a blockchain-based asset tracking technology which is unique and differentiated.

What is your advice to CEOs and how do you adapt to changes in today’s world?

• Get comfortable making frequent or sudden pivots. Never get into a comfort zone or be complacent, even when you are ahead of your competition.
• Find builders and give them responsibility, authority and accountability.
• Develop foresight and skillsets to navigate business complexity and strategic ambiguities.
• Move away from intuition to data-driven decision making wherever possible.
• Build ecosystems and develop skills to monetise them. There is no need to own the value chain, but you should learn to have a specific and influential role in it.
• Continuing with traditional approaches will not change much.
• Invest in continuous and fast-paced learning.
• When it comes to the organisation, be agile and respond quickly.

What is your advice to the Management Consulting community on how they should adapt to the changing landscape?

• Understand the changing business landscape and identify your niche, skills required and ways to play.
• Look at ways to adapt your skill set and see how you can create value as the next big thing surfaces.
• It is about constant learning, reinvention and reorientation of your skills.
• Bring data, facts and insights into everything that you do and put yourself out there.
• Your network is a vehicle to engage, learn and amplify your personal brand – reach out to people and create avenues to exchange value.
• Client relationships are for life. Stay engaged and avoid tendencies to move on after your successful project.
• Adapt your thinking from pure enterprise or client to the ecosystem itself – you will discover more ways to add value for your clients.

Kim Desrosiers is a Managing Director within the Environmental Solutions practice of FTI Consulting - an independent global business advisory firm, dedicated to finding solutions to complex problems for clients. Kim started in client services in the environmental space twenty-five years ago, moving from federal enforcement into the private sector. Here, Kim speaks to Finance Monthly about environmental forensics, clients’ expectations and the benefits of meditation for everyone.

Tell us a little about environmental forensics and the surrounding areas by which you fill your role in management and planning consulting?

Simply stated, environmental forensics is the application of environmental science and history to potential claims or actual legal cases. All forms of forensics use pattern recognition as a foundation. In modern forensics, fingerprinting is a good example of this approach and its application. Throughout the 1800s, various individuals recognised friction ridge skin patterns, both as it related to an individual, as the pattern was static over time and did not change with age, and within the human population, in that each was unique within the set. In fact, after billions of automated comparisons, no two have been found to be identical. It was found that fingerprints could be sampled and compared to a control, and over time, that process was proven to be a reliable means of identification.

Environmental forensics takes pattern recognition, and applies it in something like a data matrix within an historical construct, with boundaries applied to meet a desired objective. For example, in the case of analysing what party may be responsible for which part of an environmental cleanup, we look at the information available, what is recorded in geological repositories that have been sampled, and compare that to what is known about the historical activities that may have caused a release into the environment. Next, we place that data into a temporal matrix to identify the party or parties responsible for a release. The boundary is the physical boundary of the real property, and the desired objective can be to assign a dollar amount for the cleanup of that property, or a share of responsibility for that dollar amount, if multiple parties are involved.

How we help clients is by working with them through that process of identifying reliable patterns that reveal who is responsible, and that the responsibility is tied to meeting a certain threshold of reliability to a standard, often as defined by state or federal law. Once we identify a pattern, we can then design an approach for establishing and communicating the reliability of that pattern to others. That is probably the greatest asset of a consultant – the ability to effectively and succinctly communicate the rigger of the analysis to an audience who is unfamiliar with the jargon of the specialty field from which the data was derived. If you can convince a diverse group that the methodology was sound, your consulting is of high value.

Who do your clients commonly consist of, in which industries do they tend to work and with what problems do they come to you?

Typically, the matters we are uniquely equipped to handle from an environmental forensics standpoint involve the sites with the greatest costs, often referred to as ‘mega-sites’. Most often, our clients are operating within a self-selected group of parties, each with the experience to know that they have some measure of liability under Superfund law or equivalent state statute, and are interested in both cleaning up the environment, and avoiding litigation. Our client groups are made up of tens or hundreds of individual parties, and led by a common or coordinating legal counsel. At times, we will work for an individual client, but client groups tend to have the most complex issues relative to all similar matters, and that is where our practice really can help.

Clients come to us to help resolve environmental disputes that arise from either a lack of information or too much information. The lack of information might be driven because they found out they have liability from their counsel, but they don’t know why. We assist with the uncovering of the ‘why’ by knowing precisely where to look. On the problem of ‘too much information’, we can minimise risk and cost by opining on what is relevant or not. Given the ever increasing access to information, there is confusion because too much data obscures what really matters. We help by eliminating the noise and focusing on the signal.

What would you say are the three main pillars by which you serve your clients in this sphere?

This is an interesting and thought-provoking question. What arises for me around a pillar is its stability, and from an engineering standpoint, three is both efficient and effective. So, going with that concept of three pillars, an ‘E’ comes to mind, with equity, empathy, and excellence providing the structure. Equity has a quality of balance and measure, so that in working for large groups of parties, we are able to treat all clients fairly. Empathy is an undervalued but highly effective means for connecting with each individual client view, respecting each and their interests and concerns while simultaneously serving the group as a whole. Lastly, I would say holding the intention of excellence drives precision and discernment in every task and dollar spent.

Can you recall a particular client and dispute where your expertise proved to be crucial in achieving the desired outcome?

Environmental forensics is as much about knowing what to look for as it is knowing what it means when you don’t find it. In one matter, we were retained to develop a method to describe how each party was responsible for the costs of cleaning up a rail yard. Across the rail network, several parties had purchased one type of chemical, polychlorinated biphenyls or ‘PCBs’, as an insulating fluid for the rail cars operating across the rail system. When you look at the chemical signature of PCBs, the signal contains information about the specific ‘brand’ of the product type left in the environment. This is a classic case of chemical fingerprinting. The compelling thing about this case was that we could match the original formulation from the chemical fingerprint to historical purchase and service records for each of the rail cars on the network. We could then determine how much of one type of PCB was used by each party, and when the releases occurred. What we found was that nearly all of the costs for the enforcement action were the responsibility of one party, who was not our client. We knew our model was authoritative because it was corroborated by other independent lines of evidence. We also knew that we brought tremendous value to the client because others had previously looked at the same collection of information but failed to see the pattern. What we saw was not just that one PCB fingerprint was there, but that another one wasn’t. We won a client for life with that one.

What’s your golden nugget of advice for our readers?

Whenever I am asked that question, I always respond by encouraging others to take up a meditation practice. Above everything else, to me, working with my own mind, learning how it works, has been a constant source of discovery and enrichment. There is a confidence that develops in knowing your own mind that cascades throughout your entire life, including your professional world. I’ll credit becoming an ice climber in my late forties to meditation. And I’ll credit my clients with helping cultivate a life worth living off the ice, in this complex and opportunity-rich world of business.

Contact details:

Email: kim.desrosiers@fticonsulting.com

Phone: 610-254-4027

Aware of the coverage of transfer pricing in the media in recent years, Finance Monthly interviews Ruth Steedman, Managing Director at FTI Consulting, who has specialised in transfer pricing for over 20 years. Ruth works with multinationals to determine and implement transfer pricing solutions.  At FTI Consulting, Ruth leads a team of over 10 dedicated transfer pricing advisors, working alongside tax, economics, strategic communications and corporate finance professionals.

We have heard a lot about BEPS in a transfer pricing (“TP”) context. What do finance managers need to be aware of in relation to BEPS and TP guidance?

As part of the BEPS project, the OECD has introduced extensive new guidance for TP and international tax – much of this is already reflected in UK law. In particular, there is a focus on understanding where risks are controlled and borne within groups and remunerating group companies accordingly. Another key theme is the requirement to have sufficient economic substance, for which there is a parallel with the UK’s Diverted Profits Tax that was introduced in 2015.

Economic substance is not a clearly defined term - it perhaps suffices to say that it is no longer sufficient for risk to be borne on paper. Rather, the reality of decision making and control needs to align with intercompany contractual arrangements.

In addition, there are specific recommendations resulting from the BEPS project (under Action 4) that will impact multinational companies with intercompany borrowing. Also, companies having activity overseas should be aware of the changes to the definition of permanent establishment (“PE”) under Action 7. And, of course, there is the introduction of country-by-country (“CbC “) reporting, which is a huge development.

What is the significance of CbC reporting?

CbC reporting requires multinational groups with consolidated revenue of Euros 750 million or more to report various financial information (including revenue, profit, headcount, tax paid) on a country-by-country basis to tax authorities. In the UK this requirement is already effective for financial years starting on or after 1 January 2016.

An electronic exchange will be set up to allow tax authorities in different countries to easily exchange CbC reports, thereby potentially making the CbC data for a multinational available to the tax authority in every country where it operates. Qualifying companies are grappling with assembling the necessary information and considering how that information may be interpreted by tax authorities. Significantly, there is wide expectation that the introduction of CbC reporting will lead to an increase in TP audits around the world, which typically take a lot of time and resources to manage.

Multinationals with revenue below Euros 750 million should not be complacent as the threshold for CbC reporting is expected to come down. Smaller groups that are required to prepare transfer pricing documentation for UK purposes should consider whether to prepare TP documentation in the Master File/Local File format prescribed by the OECD.

Could you tell us more about BEPs Action 4 and what is happening in the UK?

The UK will adopt the OECD’s recommendations under Action 4 with effect from 1 April 2017 to cap the amount of relief for net interest expense. Specifically, a fixed ratio rule will be introduced limiting the tax deductions available for net interest expense to 30% of UK earnings (EBITDA). A consultation is in progress which will determine the detail of the new rules and there remains huge uncertainty for business in relation to the impact of these changes. Undoubtedly, the ETR of a lot of companies will be affected and we are already seeing moves by a number of groups to undertake a wholesale transfer pricing/supply chain restructuring.

As a thought leader in this segment, how are you keeping abreast of technical developments and interpreting new requirements?

The team at FTI Consulting has contributed to the OECD’s public consultation on new TP guidance and recently spoke at the OECD on the attribution of profit to PEs and proposed guidance for the application of the Profit Split method. As well as drawing on former HMRC experience and supply chain specialists within the team, we also have a team of experienced economists and valuation experts with whom we develop economic analyses to satisfy the increasingly complex requirements of the OECD.

Given all the recent changes in TP, what practical recommendations do you have for companies?

Our advice is in two parts: now is the time to undertake a substance and risk review and assess alignment of TP policies with the new OECD guidance for TP. Secondly, we recommend companies prepare their CbC report and Master File/Local Files as soon as possible and ensure that there is consistency between the various reports.

Is there anything else you would like to add?

We are clearly moving to an environment of greater transparency in relation to tax and TP. There are moves in the European Parliament to make the publication of CbC reports compulsory and in the UK large companies are now required to publish a tax strategy online. As of mid-September, the UK Treasury has the power to pass new regulations to require the inclusion of a company’s CbC report in their published tax strategy. It remains to be seen whether the UK Treasury enforces these powers, but in the interim companies are advised to prepare their CbC report and tax strategy.