The World Has Changed. Have You

7/29/2019 The World Has Changed. Have You

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The world has changed.Have you?

How our Advisory practice can help your business


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WHEREVER YOU AREIN THE WORLD,WHETHER YOU ARE FACING A

PERFORMANCE ISSUE,CONTEMPLATING A TRANSACTIONOR GRAPPLING WITH RISK

AND COMPLIANCE,KPMG FIRMS CAN HELP YOUBUILDSUSTAINABLE VALUE

2 KPM G Advisory

2010 KPMG International Cooperative (KPMG International). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliate


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The world is no longer in recession. Many board

members and executives are looking to the future.The experiences of the past few years have shown

businesses should be striving for a subtle balance ofcreative strategies and challenging governance.

Yes, business does need challenge. Companies shouldbe brave enough to ask the awkward questions. And theyneed rigorous risk management that ensures questionsare answered as well as asked. And a recession is a greatchance to cut back on excess spend and to streamline.

But the winners should do this while looking forward.KPMG firms see consolidation in many industries, wesee exciting new markets in the East and South andwe see new services demanded in many sectors, fromcommunications and healthcare to, of course, finance.

This is where KPMG firms come in. Wherever youare in the business cycle, if you need advice on improvingperformance, executing transactions, restructuringyour company or handling risk and compliance, KPMGsAdvisory practice can help you deliver.

We have rare global reach and are employers of choicewith a reputation for quality, integrity and consistency.

Our business model has, like our firms clients, evolved.We have sharpened our technical skills and honed ourglobal approach to transactions and risk. Through thechanges caused by the worldwide crisis we have continuedto expand, especially in the high growth markets where wehave leadership positions and are ready to respond to thefresh opportunities and demands our clients face.

But in this world of change some things have notaltered. Advisory continues to have huge strengthand depth in mature markets. KPMG firms have 30,000people, over US$6 billion in combined Advisory revenuesand work with many of the Fortune 500.

So if you want to thrive, not just survive, get in touch.

Alan BuckleGlobal Head of Advisory, KPMG

ContentsPressing challenges 4What we do 6

Key strengths 8

Performanceandtechnology 10

Transactions and restructuring 13

Riskandcompliance 16

Making a difference 19

Contacts 20

KPMG Advisory 3

KPMG partners photographed byRichard Cannon Other photography byGetty Images, ShutterstockPrinted bythe Stephens & George Print Group

2010 KPMG International Cooperative (KPMG International). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affili


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2010 KPMG International Cooperative (KPMG International). KPM G International provides no client services and is a Swiss entity with which the independent member firms of the KPM G network are affiliated

4 KPM G Advisory

LOOKING FOR

SUSTAINABLE GROWTH

PAUL BROUGH

Head of Advisory, Asia Pacific region

Its easy to be at your best when things are going well.Companies and managers can learn a lot more aboutthemselves when the market gets tough.

After the global financial crisis comes a new era. Evenin markets where growth has remained a realistic goal, theway that businesses raise capital, approach joint venturesand acquisitions, manage risk and comply with regulationshas changed radically.

Yet any uncertainty about the global economy should notdistract companies from focusing on controlled, sustainablegrowth. Financing will be more of a challenge in thenew business environment. That is why I expect morecompanies to realize that collaboration through alliances andjoint ventures is essential to their growth strategy.

M&A will remain crucial,but the emphasis will be onmaking sure deals deliver thevalue investors were promised

The idea that cooperation is the new competition hasalready become something of a clich. It would be moreaccurate to say that those who do not have the skills tocooperate and collaborate may find it harder to compete.

Mergers and acquisitions will remain crucial, but theemphasis will be on making sure these deals deliver thevalue investors were promised. As the anticipation of thevalue to be extracted from an acquisition typically accountsfor 50 percent of the purchase price, managers who failto execute post-deal integration properly are effectivelythrowing money away. Companies should also feelempowered to dispose of non-core assets to focus on themost promising and profitable areas of the business.

Growth should never be an end in itself. The focus must

be on sustainable, profitable growth that enhances thevalue of the business.

Forward thinking

(from left): Paul Brough, Alan

Buckle and Mark Goodburn

THE FUTURE IS FULL OF

REALIGNEDPRIKPM

GS

OREG

RION

IAL

TL

IE

EAD

SERS

.PRESENT THREE OF THE

MOST PRESSING


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KPMG Advisory 5

Anyone who believes that

an economic upturn meansbusiness as usual shouldprepare to be surprised

STAYING

IN SHAPE

ALAN BUCKLE

Head of Advisory, Europe, Middle East and Africa region

In the past, CEOs and CFOs were measured by the growththey achieved, the value they created and the performancethey delivered. In the future, they are likely to be judged bythe ambition they show when managing costs in bothgood times and bad.

Companies that set modest cost reduction targets andfail to meet them risk alienating investors and could, giventhe uncertainty of the recovery, leave themselves vulnerable

in years to come.

In the future, CEOs are likelyto be judged on the ambitionthey show when it comesto managing costs

Businesses across the world have had to re-examinetheir cost base in the economic turbulence of the recentpast. One of the challenges now is to seek to ensure that thesavings deliver not just short-term tactical gains but alsolong-term sustainable improvements in business efficiency.

Those organizations best placed to achieve suchimprovements have looked beyond simple cost cutting andshort-term remedies to think radically about their businessmodel. They have taken a hard look at their processes,

identified how they can simplify their operations andempowered departments to perform by liberating themfrom red tape. They have improved the flow of informationto senior management, optimized their supply chain andensured their IT systems are lean and efficient.

As growth returns to the agenda, it is imperative thatsuch examination of business processes becomes embeddedin the culture of every company so that management cancreate sustainable change and, where necessary, take thebold strategic leaps to maintain efficiency.

Exceptional circumstances require exceptionalmanagement but the enduring lesson is clear: soundbusiness processes are a key weapon in a companysarmory at any time, not just during a crisis.

PREPARING FOR

A NEW LANDSCAPE

MARK GOODBURN

Head of Advisory, Americas region

We are getting a clearer picture of a new business landscapeformed by the seismic shocks of recent times and it looksvery different in some fundamental ways.

Some things never change. Cost optimization will beimperative, long-term vision will continue to be central togrowth and while the funding mix will undergo a much-needed rebalancing, the search for capital goes on.

Yet companies, and in particular multinationals, that

believe an upturn in economic conditions means businessas usual will be surprised. The organization of tomorrowis flexible shifting markets and mindsets seamlessly and ready to hunt for revenue streams outside its comfortzone. It is prepared to embed sustainability in every area ofoperations, anticipating a future where it could be judged onits green credentials as well as its shareholder returns. It usestechnology to deliver relevant information, engage customersand be more responsive. It views the world as a single marketand is ready to understand the opportunities that the rise ofIndia, China and other fast-developing economies brings.

Underpinning these fundamentals is an uncertain

regulatory landscape, with cross-governmental cooperationlikely to result in more punitive regimes and a need forgreater transparency. Engaging regulators and politicianswill become crucial for CEOs.

Meeting these challenges need not mean reinventingthe fundamentals of business. But it does require aresponsiveness and acumen many leading companieshave already begun to foster. More than ever, simply

focusing on the day-to-day is not enough to feelconfident about tomorrow.


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No business is an island, and KPMGs Advisorypractice is an indispensable helping hand forsome of the biggest companies in every sector,

right across the world. We seek to add value as our

firms professionals immerse themselves in our clientsoperations, understanding their needs, culture andunique requirements. We provide objective advicebased on experience but tailored to supportindividual circumstances.

We seek to go beyond simply supporting operationsor transactions and reach into every aspect of corporatestrategy, as well as advising on complex services relatingto regulation, valuations and risk management.

Our teams are client-focused and cooperate internally,working across both internal business areas andinternational jurisdictions to deliver genuine results. So,no matter what stage of the business cycle you are in, orwhere you want to be, we can point the way forward.

IF ITS ON YOUR AGENDA

ITS ON OURS.THIS IS HOW KPMGS ADVISORY PRACTICE

CAN ADDVALUETOYOUR BUSINESS



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Performance& TechnologyRecognizing the new businessenvironment means rethinkingevery aspect of how you operate

Revenue enhancement and costoptimizationControlling cost and maximizingrevenue is key to performance. Findingcost optimization opportunities canhelp ensure greater investment in areasthat drive growth.

IT-enabled transformationIT is a critical enabler of change andgrowth. It should be aligned to businessstrategy, driven by an understanding ofthe impact on business processes and aconstant focus on delivering benefits.

Deal servicesDeriving the most value from mergersand divestments is vital to deal success.Coordinated efficiencies across finance,IT, HR and operations can realizetangible business value more quickly.

Embedding risk management

and regulationEmbedding risk and complianceprocesses throughout operations iscritical today. A holistic approach inlinking people, process and technologycan deliver sustained benefits.

Transforming operationsEnsuring operations are geared toachieve business strategy is essential toimprove growth prospects. Designingmodels to support front and back officeoperations can drive real efficiencies inachieving broader business objectives.

Finance transformation and businessintelligenceImproving the value generated fromdata can support decision-making anddeliver genuine competitive advantage.Transforming finance with moreeffective processes, IT and performancemanagement can offer tangible benefits.

Working capital and cash managementBetter cash management, as well asalignment of cash and working capitalstrategies to business goals, can releasecash, improving returns on capital.

Transactions& RestructuringTo make the most of the opportunitiesrapid change brings, you need reliableadvice from experienced professionals

Strategy for growthWhere is your business going?Where will future growth come from?Answering these fundamentals is easierwhen you have unbiased advice fromexperienced professionals who takethe time to understand your needs andexamine every possibility.

Successful mergers & acquisitionsKPMG can advise on M&A, fromstrategic planning and due diligenceto pensions advice and post-mergerintegration. In 2008, KPMG firmsadvised on 395 transactions.

Consolidating and restructuringRestructuring can stabilize a troubledbusiness and our Chief RestructuringOfficer service can aid the processwith independent advice at a seniorlevel. Turnarounds, group streamliningand exit planning services are also

within our experience.

FinancingOur firms experience is valuablethroughout the corporate financingprocess from raising capitalto refinancing and conductingIndependent Business Reviews,which can highlight issues and areasof underperformance across thebusiness and show a more effectiveway forward.

Value from disposalsFreeing up cash, whether for growthor to service debt, needs a consideredapproach. By understanding yourobjectives and your companysposition in depth, KPMG can helpstructure a deal that meets your needs,no matter how complex.

Crisis managementWhen the situation becomes critical,specialist advice can make a substantialdifference during complex insolvencywork or crisis cash management. Ourdistressed M&A service offers a lifelineto struggling companies.


Risk &ComplianceFrom planning for the future todealing with present dangers, is riskembedded in your organization?

Governance, risk and complianceRisk is a more daunting challenge forbusinesses in every sector. Acting tomake it more manageable will protectyour business. KPMGs approachmixes a healthy attitude to growth witha sensible view of the landscape.

Regulatory complianceFinancial regulations are changingprofoundly and rapidly, so its hard tokeep up. Being clued-up on complianceprotects your organization and itsreputation from costs or penalties.

IFRS implementationNeed help converting to IFRS? KPMGbelieves the widespread adoption ofIFRS gives business an opportunity toexamine existing processes and boostinvestor and market confidence.

Continuous auditing and

continuous monitoring (CA/CM)Companies are discovering the valueof CA and CM, which give internalaudit and finance functions enhancedand speedier access to information,and ensures controls are functioningand transactions are properlyprocessed. KPMG firms candemonstrate CA/CMs value andadvise on its implementation.

Contract compliance servicesCompliance by third parties with keycontracts, and scrutinizing their self-reporting, is critical to maximizing

revenues and ensuring costs areappropriate. KPMGs firms contractcompliance professionals can assistin enhancing your performance.

Global investigationsWhen fraud, corruption or misconductare suspected, KPMG firmsprofessionals can offer detailed help.

Sustainability servicesSustainability is no longer simply niceto have: KPMG firms offer a broadrange of services across all sectors.


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WHY CHOOSE KPMG? BECAUSE OUR

KEYSTRENGTHSARE QUALITIESTHAT CAN HELP YOURBUSINESS THRIVE

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Effective globalcoverage withskilled resource

Global businesses needadvice from an organizationthat has a truly globalnetwork, with the samecommitment to excellencewherever our firms operate.KPMGs Advisory practicehas strength and depthin major and emergingmarkets. Our Advisorypractices are among thetop advisors in Brazil, China,India, the Middle East,Russia and south Asia.

Whether the challengeyour business faces is inBeijing, Berlin or Boston or all three you can expectthe same quality of service,calibre of insight andunderstanding of your needsfrom KPMG member firms.

All of which we believemakes us indispensable tomultinational businesses asthey tackle issues affectingtheir costs and operations:emerging centers ofmanufacturing, outsourcingopportunities, anddemographic andgeographic shifts whichredefine customer bases.

Deepinsight andunderstandinggained fromworkingwith globalchampions

No matter what your areaof business, the chances areKPMGs Advisory practiceis already working with amarket leader. Our Advisorypractice has 30,000 peopleworking in member firmsaround the world workingwith global leaders, advisingmany of the Fortune 500companies, as well asfast-growing businesses.Our combined Advisoryrevenues exceeded

US$6 billion in 2009.Our sector experience

covers a broad range, fromcommunications to energy,from government and healthcare to financial services. Ourdepth of knowledge means

we understand the marketsyour business operates infrom different perspectives.We can offer bespokeadvice backed up by genuinepractical experience ofsuccessful operations of

varying scale and discipline.In 2008, KPMG member

firms advised on 395 M&Atransactions in deals thatwere cumulatively worthUS$73billion. KPMGsAdvisory practice hasthe resources, flexibilityand diversity to managea single vertical project orcollaborate on somethingbroader and incrediblycomplex.

KPMG Advisory 9

A highlycollaborativeculture butnot afraid tochallengeOur job is simple: to helpyou make the right strategicdecisions. We believe that

collaborative teamworktranscending individualdisciplines is essential tohelp you exploit emergingopportunities, safeguardagainst risk and createshareholder value.

Such collaboration is,we believe, the most fruitfulway to work with clients,too. We are not afraid tochallenge but we prideourselves on being easyto work with. And when

the key decisions have beenmade, our work isnt done we support our firmsclients in executingstrategic shifts and dealingwith problems or necessaryrevisions that might arisealong the way.

Employersof choiceattractingoutstandingpeopleKPMG member firms areable to attract and retainthe best talent by creating

a challenging and rewardingwork environment. AtKPMG Advisory, ambitiousgraduates and experiencedprofessionals developtechnical skills in a particularservice such as finance,IT or restructuring work inmultidisciplinary teams andare encouraged to becomeinnovative thinkers whoseadvice is trusted at thehighest level of business.

Our firms quality

has been praised aroundthe world and was namedin more than 20 differentrecognized awards during2009. Among them, KPMG inthe U.S. was named amongthe 100 best places to workbyFortunemagazine.



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Performance and technology

10 KPMG Advisory

YOUVE REFINEDYOURLONG-TERM

STBUT DORYOAURTOPEERGATIOYNS.SUPPORT YOUR GOALS?


As we emerge from global recession, organizationsare re-assessing their future. Objectives arebeing revised, strategies realigned and growth is

definitely back on the agenda. In order to respond to thechallenges and opportunities presented, they are havingto critically assess the suitability of their operatingstructures. A strong focus on efficiency must bemaintained and should be balanced by a deeperunderstanding of how the organization creates anddelivers value to its customers and stakeholders.

DRIVING GROWTH IN A COST-SENSITIVE MA RKET

Many organizations now face the prospect of atransformational journey to respond to an environment ofconstrained growth. This requires looking holistically andobjectively at existing operating structures to determineopportunities that will drive profitability and protect thetop line. KPMGs Performance & Technology team hasextensive experience of taking an external perspectiveof an organizations operations, back office functions andportfolio of customers and products to rapidly identifyopportunities to significantly improve performance.

Often, the results of these exercises are challengingand stretching. We encourage leaders to look at themore complex aspects of their organization to unlock

efficiency and value. This might include identifying newbusiness models, leveraging global shared services andsourcing models, and breaking down a value chain todetermine opportunities for greater profitability. CEOsshould look outside their traditional peer group forideas about cost, says Aidan Brennan, Global Head ofKPMGs Performance & Technology practice. Traditionalbenchmarking can highlight opportunities for improvementbut in todays environment, leaders need to be askingbigger, more challenging questions and looking beyondtheir immediate peer group for comparisons.

Once organizations have determined the benefits of

transformation, they need to create buy-in and ownershipamong staff and stakeholders alike. The burningplatform and the associated case for change need to becommunicated in a way that truly engages the organizationand inspires individuals to take on the challenges ahead.Creating a culture that drives growth in a cost-consciousenvironment is imperative. This requires leaders toembody the change they want to see and implementincentives to address both financial and non-financialdrivers of motivation.

Transparency over costs and profitability, whencombined with the appropriate governance structure, canbe a powerful enabler of sustained performance. KPMGs


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78of senio

%r finance

professionals believefinance technologyimproves thequalityof reporting

Business Intelligence capability can enable organizations to

quickly align strategic objectives, performance measuresand the associated information architecture to quicklyprovide decision makers with information they can trust.

BUSINESS TRANSFORMATION ENABLED

BY TECHNOLOGY

Ten years ago, the application of technology solutionsto an organization was seen as purely the domain of theCIO. Technology is now integral to every aspect of anorganizations business operations. To deliver real businessbenefits, it is essential to combine a deep understanding offunctional and operating processes with knowledge of theenterprise-wide platforms that deliver them. This meansworking closely with business stakeholders, as well as IT,

to shape and design solutions and then implement themon time and with the business case delivered.

IT solutions themselves need to be selected becausethey are the right option for an organization. Too often,organizations do not seek independent systems advice andmake costly investment decisions which merely automate

existing process inefficiencies. Our network of more than6,000 IT Advisory professionals puts objectivity and anunderstanding of business needs at the center of what we do.This can help organizations embarking on a transformationjourney to benefit from our knowledge and experience ofwhat works and, more importantly, what does not work.

CFOs should look outsidetheir peer group for comparisons.In todays environment, leadersneed to be asking bigger, more

challenging questions

KPMG Advisory 11

Reorganizing thefinance functionresulted in betteroverall performance,according to

60%of companies surveyed


PERFORMANCEAND TECHNOLOGYAT A GLANCE Driving cost and growth Enabling transformationthrough technology Transforming operations Transforming finance Embedding risk andregulation Protecting value duringdeal-based change

TRANSFORMING OPERATIONS

In addition to IT-enabled transformations, our Performance& Technology business provides a wide range ofoperational improvement services, including tax-efficientsupply chain models, lean manufacturing, sourcing and

procurement. Our approach focuses on delivering valuenot only in the short term but also sustaining the potentialbenefits for the organization long after we have left. Ourfirms have worked across a wide range of sectors to deliveroperational improvements, and sustain the benefits of

those improvements by building skills, knowledge andcapabilities in client organizations.

GETTING VALUE OUT OF TRANSACTIONS

As the M&A markets pick up, many businesses arecontemplating strategic acquisitions or disposals. Bycombining the deal-based skills of our TransactionServices teams with the process, people and technology


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capabilities of Performance & Technology, KPMGfirms can add value through the life cycle of a mergeror acquisition. Our knowledge of functional processes,operational processes and behavioral change can be appliedpre- and post-deal to accelerate acquisitions, separationsand the integration process. Most importantly, KPMG firmsexperience can help ensure that the rationale for the deal to generate profitable synergies between the organizationsinvolved is not forgotten long after the deal is completed.

How relevant areKP MG firms to todays

consulting market?

I believe we are highly relevant

to the marketplace today.

Clients have become more

mature and discerning over

the years. They understand

that technology alone is not

the solution. Rather, greater

emphasis must be placed on

addressing business needs

and leveraging technology

as an enabler to deliver the

business case. Our strategyis to focus on the broader,

business-led offering which

balances an organizations

competitive positioning and

functional and operational

strategies with deep

people, process and

technology knowledge.

Over the last four

years, our Performance &

Technology business has

worked with some of the

largest, most complex

Q&Athe dynamics of thenew market.

Two common mistakes

many businesses make with

regard to cost reduction are

1) simply deferring costs

and 2) making sweeping cuts

across the board to improve

short-term performance.

If you decide to just push

budget into next year, or

defer investments, you risk

putting the business on

hold without tackling its

underlying cost base andprofitability. Equally, while

the idea that everyone should

take roughly 10 percent off

their budgets can be partially

effective by forcing people

to focus on cost, it rarely

delivers sustainable cost

advantage to really take the

business forward. That is

why our teams prefer to take

a rapid, organization-wide

view of potential upsides to

business performance.

Performance and technology

12 KPMG Advisory

AIDAN BRENNAN

Global Head of KPMGs

Performance &

Technology practice

Companies who try to weatherthe storm may struggle. Theyshould ask substantial questions oftheir business model and embracethe dynamics of a new market

organizations in the world.I am confident the market will

continue to see value in our

skills as organizations continue

to navigate a challenging

economic environment.

Cost continues to be a

challenge for organizations.

What would you advise

them against doing in the

current environment?

More organizations are

recognizing that the journey

out of this recession is likelyto be long and wont be

characterized by a rapid

bounce back to the boom

years. Organizations that

try to weather the storm,

without putting long-term

sustainable improvements

in place, are therefore likely

to struggle. In my opinion,

the winners will be those

who ask more substantial

questions of their business

model and truly embrace

2010 KPMG International Cooperative (KPM G International). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated

TRANS FORMING THE FINANCE FUNCTIONThe CFO and the finance function are increasinglyconsidered the right hand of the CEO, and central toimproving performance. CFOs have become moreinvolved in strategy development and, in response, finance

functions are expected to understand the true drivers ofvalue for an organization and rigorously ensure they aremeasured and acted on.

In response to these changes, finance functions musttransform themselves to reduce costs, while increasing theeffectiveness of the business support they provide. Simpletasks such as invoice processing might be outsourced, andlower-value processes such as month-end close can oftenbe performed more efficiently in specialist shared servicehubs, enabling retained finance teams to focus on decisionsupport and driving performance.

Managing future performance is an especially importantconsideration: 2009 research conducted on behalf of KPMGInternational, Being the Best: Thriving, Not J ust Surviving:Insights from Leading Finance Functions, discovered thatcompanies think their finance teams urgently need to bolstertheir forecasting, planning and budgeting skills. Against thisbackdrop, it is unsurprising that our teams work closely withbusiness-facing finance managers to improve their soft skillsto better influence operational decision makers.

In conclusion, KPMGs Performance & Technologybusiness is here to advise our firms clients as they embarkon their transformational journeys in response to animproving but challenging market environment.


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Transactions and restructuring

OUR PURPOSE ISTO BE ABLETO LEADCLIENTS THROUGH

THEECONOMICCYCLEAND BE THEREFOR THEM AT ANY POINT

Smart spenders use a downturn to plan for the future and then go aggressively out to meet it. Adidas, Hewlett-Packard and Microsoft all launched in tough times. After

a recession comes the opportunity to profit from the upturn.Indeed, the current financial situation offers businesses the

perfect chance to reassess their priorities. Some will proveWarren Buffetts dictum that cash, combined with courage ina crisis, is priceless. Others will find the skills to turn a difficultsituation around. Organizations with a healthy balance sheetand cashflow may use tough conditions to grow market shareor boost assets by finding the key transaction to positionthem for the upturn. For businesses under stress, maintaining

control of their destiny is the priority, as they restructure tooffset declining revenue or pressure from creditors.

No action is without risk, whether it be embarking on M&A,sourcing finance or restructuring, but KPMG firms seek to takea proactive position. For Simon Collins, KPMGs Global Headof Transactions & Restructuring, one of the keys is ensuringthat each action is seen in the context of achieving thebusinesss wider goals, part of a deal lifecycle, with KPMGcontributing at each stage. Our purpose is to be able to leadclients through the economic cycle and be there for them,Collins says, helping them with growth opportunities andacquisitions when times are good and helping them tosurvive and maintain control when times are not so good.

THE DEA L LIFECYCLE

Our deep sector experience, our skills and specialismsand our global reach can help our firms clients to findopportunities and execute them efficiently.

At each stage of the deal lifecycle, and in different sectors,we seek to add value. A typical example is the sponsor-initiated Independent Business Review (IBR) for private equityfirms. It gives prospective lenders a robust, independentoverview of a PE investee firm, a proactive initiative that cangive the sponsor an authoritative edge to help expedite a deal.

We are using KPMGs extensive experience of duediligence to redefine the parameters of what constitutes a

good deal. Even the notoriously hard-nosed M&A sector islooking at due diligence in the light of sustainability and CSR.Companies that have invested in these areas are less likely to

be interested in purchasing a business with a sustainabilitydeficit and KPMG has the tools to reach a robust judgement.

MA KING TRANSA CTIONS WORK

Securing the right deal at the right price is key, which is whypre-deal evaluation and valuation services are important inthis area and they call for a genuinely objective view. Toooften, companies have been swayed by internal or externaladvice given with a vested interest in increasing M&A activity.KPMG firms professionals are more interested in telling

KPMG Advisory 13


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clients whats right for them throughout the deal cycle thanin increasing short-term opportunities for ourselves. Therewill always be another transaction, but relationships can bebroken very quickly. Giving clear, and occasionally unpopular,advice is essential for maintaining trust.

Getting M&A right is a challenge: a KPMG Internationalstudy in 2009 All to Play For: Striving for Post-Deal Success found that 73 percent of M&A transactions dont deliverthe expected value. In boom times, too many companiesapproached acquisitions casually, downplaying what oughtto be a meticulous process. If youre striking a deal for theright reasons, with a clear strategic vision, M&A can bea valuable part of your companys growth strategy.

Downturns can focus the mind and stimulate fresh thinking.The right transaction might be offloading an underperforming

subsidiary to free up cash or exploring a joint venture thatcould give you a foothold in another geography while sharingthe risks with a partner. An asset swap might allow you tobring in exciting businesses or shed underperformers.

No matter what the transaction, success often dependson post-deal integration, yet there can be a tendency for thisdetailed, essential work to slide down the agenda after theglamorous business of negotiating the deal has been done.

KPMGs M&A Predictor helps companies plan for thefuture and gives a clear idea of how their peers are reacting

to market conditions. Whether its raising fresh funds,restructuring or backing M&As, the need for a dispassionateview of the options has never been more pressing.

Transactions and restructuring

There is a thirst and a need foradvice that is dispassionate andis not connected with the successof an underlying transaction

14 KPMG Advisory

52%of joint venturesmeet orexceedexpectations,saypartner companies

Clear reporting andKPIs arevital, say

83%of companies planninga working capitalimprovement program

Source:KPMGInternational

cashsurvey,

Oct2009

Source:Jointventures,

KPMG

International,June2009

RESTRUCTURING GOALSAT A GLANCE Cost reductions Cash management Turnaround planningand implementation

Financial restructuring Exit planningand implementation Debtor-, creditor- orcourt-driven formalrestructurings

THE DEAL LIFECYCLEAT A GLANCE Pre-deal evaluation: findthe right price Secure the finance Obtain stakeholder buy-in Perform due diligence Align deals withobjectives Maintain compliance Work for good integration Extract value Equity/debt capitalraising, capital restructuringand securitizations

HOW KPMG FIRMSCAN HELP Acquisitions, mergers,takeovers, buy-outs,divestitures and demergers,joint ventures

RESTRUCTURING FOR VALUE

By definition, restructuring is about retaining and increasingvalue, improving cashflow, profitability and the balancesheet. Often, restructuring is used as a last resort by abusiness whose value is under threat, but sometimes it is justa natural part of the business cycle: effective companies are

continually asking themselves whether they have the rightshape, structure and spread. Timed correctly, restructuringcan pre-empt serious financial problems, sharpen strategicfocus and, in the long term, deliver shareholder value.

KPMGs Advisory practice can help with the big pictureand sweating the detail. If you need to restructure, we cananalyze cost drivers, offer an established methodology forvalidation, approval and delivery of actions and help ensurethat line managers are engaged in delivering improvements.We can provide a Chief Restructuring Officer service toimplement a full turnaround.

Even in severe situations, focusing swiftly and decisivelyon the strategic and financial impact of restructuring means


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managers can safeguard value and remain in control.Restructuring can be more complex than an acquisition.The nuances and legal requirements vary between countries,but KPMG firms professionals have global experience.

KPMG Advisory 15

What are the main issuesyou see in the market?

Fifteen years ago, equity

came from capital markets

and institutions, debt

came from banks, and

transactions took place if

they made strategic sense.

Then somebody threw away

all the rules, so equity came

from private equity firms,

sovereign wealth funds

and hedge funds and you

didnt need much because

debt was coming from allmanner of institutions,

of which the banks were

increasingly becoming

intermediaries. People

lost sight of the strategic

purpose and things started

to be driven by financial

engineering.

Many companies lost

the provision of objective,

independent advice.

Everybody had an interest

in doing something rather

than notdoing something.

If you look at thecharacteristics of true

objective advice, its being

able to say dont or slow

down, not lets go. There is

a thirst and a need for advice

that is dispassionate and

not connected with the

success of an underlying

transaction, and this is

a KPMG strength.

How has the make-up of

transactions changed?

Pre-crunch, everybodywanted to buy and sell

businesses. Now its

only happening because

people are being forced

to do something. A lot of

transactions are creditor-

driven in one form or another.

What are the particular

factors that affect M& A?

Theres not enough focus on

strategic value or purpose

behind deals. Massive

synergies are identified and

Q&Aused as justification, andvery rarely does as much

effort go into realizing those

synergies. But as funding

becomes more difficult and

the hurdles for attracting

funding successfully

become higher, people

start to do deals for

more strategic purposes,

and I think more M&A

transactions will be

successful.

How w ill that trenddevelop?

Over the next three years,

virtually every private

equity portfolio company

will be refinanced,

restructured or sold.

You could argue thats

the same as in a bull market,

but there is going to be

an increasing pressure for

transactions to be done

to shore up or sustain the

balance sheet of a parent

or a fund.

SIMON COLLINSGlobal Head of KPM GsTransact ions &Restructuring practice

i

l i

h i

FINANCING FOR THE FUTURELast but not least, there is an inevitable focus on funding.Todays range of funding providers, from sovereign wealthfunds to small savings banks, means the lender base isfragmented. It is easier for management to be distracted

by financing when it needs to focus on operations.The fallout from the financial crisis is far from over.

Banks have yet to achieve the conservative balance sheetstructures that investors and regulators may demand.PE firms are still adjusting to lower returns, but theirrelentless focus on results and their ability to take the longview suggest this financing model cannot be written off.

KPMGs knowledge in this vital area is underpinned byour network of 2,000 professionals worldwide. In 2007,KPMG firms handled more than 1,700 mandates, worthUS$780 billion overall. We believe it is the quality of KPMGfirms professionals experience and deep sector knowledgethat make the difference.

The most successfuldeal-makingbusinessesspend

35%longer on averageconducting pre-LOIdue diligence


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Risk and compliance

16 KPMG Advisory

RISK MANAGEMENT IS THE JOB

HOWOFEVERYONE

FR

ROOM TH

BUSECEODOW

TN.

IS YOUR PROGRAM OFRISK AND COMPLIANCE?


Risk in business can take many forms. Senior managersare required to consider emerging risk, systemicrisk, risk management and developing a culture that

ensures risk becomes part of the organizations DNA. Itsnot enough just to have a risk management function, youhave to practice risk management and that depends ongovernance and culture. Mike Nolan, KPMGs Global Headof Risk & Compliance, says: Its the risk culture that helpscompanies do the right thing and not fall into the trap ofdoing whatever it takes.

The global recession has prompted G20 governments toagree to a major shake-up in regulation. New international

accounting standards and tougher corporate governancerules will help businesses to focus more intensely onrisk and compliance. Mere compliance is not a strategicapproach; KPMG firms are working with companies to helpthem find the value add in risk management.

RISK MA NAGEMENT STRATEGY

For a companys finance function, risk is an importantconcern. From capital reserves to investment policies andsupply chains, many aspects of the finance teams work callfor an increasingly firm handle on risk management. Andother threats, such as the risk of fraud or the danger oflitigation, can have a hefty financial impact.

No business can eradicate risk, but it can be mademore manageable. KPMG firms are among the leadersin helping companies address weaknesses in their riskmanagement processes, including combining risk modeldata with human judgement more effectively, initiating stresstesting and scenario planning, and putting in place systemsthat reward long-term stability and not just short-term profit.

At many organizations, risk management will be seenas a box-ticking exercise, carried out in the back officewith little input from individuals on the front line and lessacceptance in the executive suite.

This approach is short-sighted. Risk management

is not simply the task of a single department, it is theresponsibility of everyone, from the CEO down. Thiscan be difficult to put into effect culturally: a 2009 KPMGInternational survey of the banking industry reportedthat fewer than half of institutions planned to makefundamental changes to their risk frameworks despitethe fall-out from the financial crisis.

One of the keys to making progress on risk managementis pushing it further up the corporate agenda. If internalaudit is elevated from pure compliance to a function thatreviews the risk profile for emerging risks and identifiestrends, it will keep its finger on the pulse of performance.The chief risk officer will increasingly get involved in


17/20

strategic decision making, where the emphasis is as much

on risk as it is on growth.Similarly, KPMGs experience can prove vital in helping

management put together an effective fraud strategy.Fraud is on the rise in many sectors, and leadingcompanies have had to rethink their strategies to meeta threat which is growing in both scale and complexity.

Apart from assisting with strategy, we can provide somevery practical help with recovering revenue. KPMG firmshave had great success recovering income mis-statedin self-reporting statements, while maintaining andimproving relationships with businesses.

Risk management is increasingly being viewed asa driver of business change, and companies examiningrisk have a valuable opportunity to ensure their risk

strategy adds ongoing value rather than merely meetingregulatory requirements.

KPMG Advisory 17

Having a risk culture helpscompanies do the right thingand not fall into the trap of

doing whatever it takes

76%ofsenior riskmanagersfeel the riskfunction is stigmatized

45%of banks say theirboards are short ofrisk knowledgeandexperience

61%of businesses plan toplace more emphasisonstresstesting andscenarioanalysis

Source:RiskManagementinBanking,

KPMGIn

ternational,January2009

Source:RiskManagementin

Banking,

KPMGI

nternational


THE POWER OF RISK MANAGEMENT

Leaders face a balancing act of pursuing their challengingcorporate objectives while staying compliant withregulatory requirements. One mechanism that can be usedto uncover the value add in risk management is CA/CM

continuous auditing/continuous monitoring. CA is thecollection, on a frequent or continuous basis, of auditevidence on IT systems, processes and transactions. It canincrease audit efficiency, enhance auditor competency andensure compliance.

CM is an automated feedback mechanism for finance, toensure systems operate as intended and transactions areprocessed as prescribed. It enhances how internal controls

are monitored, improving risk management and businessperformance. CA and CM give boards insight into thestatus of controls and senior managers visibility into theorganization. They are designed to provide internal audit

with warning oferrors and misconduct, and finance linemanagers with better tools for day-to-day management.

RISK AND COMPLIANCEAT A GLANCE Corporate governance Enterprise riskmanagement Regulatory compliance Continuous auditing/continuous monitoring(CA/CM)

Global sustainability/climate change IT controls andinformation protection Internal Audit sourcing Contract compliance Financial riskmanagement Actuarial Forensic technology/ediscovery Investigations Dispute advisory IFRS

THE REGULATORY CHALLENGE

Keeping up with changing regulatory regimes has neverbeen easy. But as the world attempts to make sense of thecredit crisis, the rules companies must abide by becomeever more stringent. The challenges for boards monitoringtheir accountability have rocketed. Part of our ongoingcommitment to the regulatory landscape is a frequent andmutually beneficial dialogue with regulators. We feed theresults of this dialogue back into the services our firms offerclients. The consequences for a corporate business of


18/20

non-compliance are varied and they can be bothfinancial and reputational.

What are the keyissues for businesses

considering their risk

management strategy

and processes?

Organizations have to ask

themselves some serious

questions, such as: how can

we transform an expensive

compliance obligation into

a real business advantage?

Is risk a key consideration in

making strategic decisions?

Are we forward-looking in

addressing emerging risks?Organizations are moving

from value preservation to

an attitude of value creation.

And thats why the topic is

becoming of increasinginterest at board level.

Organizations that succeed

in this area will have the

strategic vision to understand

that sophisticated risk and

controls management has the

capability to deliver beyond

the basic goals of reducing

potential financial losses

and meeting regulatory

requirements. Why make

an added investment if all

it achieves is compliance?

There has always been scopefor risk management to

progress from score-keeping

to value add.

What are the barriers to

reaching that point?

Theres better understanding

of financial risks as a result

of Sarbanes-Oxley and

other regulations, but less

appreciation of how risk

permeates the rest of the

business for example,

reputational or operationalrisk. A secondary concern

is having the right resources

in the right place. Many

businesses will decide they

need a third party provider to

plug the gaps in risk skills.

Q&A

Risk and compliance

18 KPMG Advisory

What practical steps canbusiness leaders take to

address these barriers?

Risk management should

be seeking to raise its profile

within the business. A risk-

aware culture needs to

permeate the organization.

Consideration of risk needs

to form part of the everyday

decision-making process,

including across the three

lines of defense: at the

business unit level, the

central risk managementlevel, and internal audit.

However, companies need to

avoid taking this too far and

creating a risk-averse culture

where no opportunistic

decisions are made.

How important will risk

be over the coming years?

Many companies are at last

paying it the attention it

deserves. If companies are

able to deliver some real

changes, theres no reasonwhy risk management

cannot become the fourth

key platform of a companys

performance in terms of how

its judged, alongside people,

process and technology.

Why make an investment if allit achieves is compliance? Thereis scope for risk management tobecome a value add

MIKE NOLAN

Global Head of KP MGs

Risk & Compliance

practice

For multinationals, dealing with compliance in differentjurisdictions adds a layer of complexity, while efforts to

comply with Sarbanes-Oxley and the like have highlightedthe underperformance of IT as a strategic business enabler.Many companies find IT, with its various security issues, themost challenging area in achieving compliance. The adoptionof IFRS is designed to standardize reporting practice and


harmonize cross-border transactions, but for many companiesimplementation has been onerous. The financial crisis hasslowed progress, as regulators review their attitudes to risk.

KPMGs Advisory practice can help train your board in

director responsibilities, obligations and better practicegovernance requirements. We might also assist you indesigning a governance framework for your organization, orassessing the capabilities of your companys audit committee.

Smart companies see a changing regulatory landscapeas a significant opportunity to examine processes and boostinvestor and market confidence. For example, a 2004 KPMGInternational survey Basel II: How Ready Are Banks? foundthat many banks invested heavily in improving operationalrisk management to comply with Basel II, which madebusiness systems more effective. Understanding the riskenvironment, and knowing where control takes place, gives aninsight into processes and opportunities for improvement.


19/20KPMG Advisory 19


Putting our experience to work

Many of the big issues facing the world today population growth, climate change,globalization, poverty alleviation, technologicalchange, food, water and energy security and thespread of infectious disease affect business.They certainly affect KPMG and its people.

At KPMG, giving back to the communities in which we liveand work is one of our core values. Our approach to corporatecitizenship is founded on the belief that business has a criticalrole to play in helping solve the worlds problems.

Timothy P. FlynnChairman, KPMG International

We have a clear vision of what our roleshould be. We believe that companiesmust not only be engaged with theirstakeholders, but are themselves stakeholdersalongside governments and society. Usingthe Millennium Development Goals as our

blueprint around the world, we are aligning our skills andcapabilities with governments, civil society groups andNGOs to become fully involved in finding solutions topressing global and local issues.

Lord Hastings of Scarisbrick CBEHead of Citizenship and Diversity, KPMG International

By harnessing the professional skills we use every day, and applying them to the worldaround us, KPMG firms are helping to make positive changes both locally and globally

Disaster relief effortsIn 2008, a devastating cyclonestruck Burma (Myanmar), followedby an earthquake that shookSichuan province in China.KPMG firms and people reactedimmediately, contributing to aglobal appeal that raised US$2m.Funds were channelled tohumanitarian organizations on theground, such as CPFA, Save TheChildren and World Vision. KPMGpeople also used their skills tosupport immediate relief effortsand develop ongoing relationshipswith affected communities. People

from KPMG in China, for example,provided financial management,created procurement and logisticssystems and monitored carepackages for students.

Global Green Initiative (GGI)

KPMG International launchedthe GGI in 2008, using skills fromour Sustainability Services team.As well as engaging our people,suppliers and clients to make apositive and significant differenceby reducing their carbon emissions,this program includes an ambitiousplan to reduce our combinedcarbon footprint by 25 percent by2010, from a 2007 baseline.

Familia Moja Childrens CenterIn 2007, 21-year-old J amesWoodward, a graduate at KPMGin Australia, volunteered at a smallorphanage in a slum in the Kenyancapital, Nairobi. Lack of resourcesforced the directors to close theorphanage, leaving the orphanswithout a place to live. J amesarranged for the children to bemoved to a small village outside thecity, and helped create the FamiliaMoja Childrens Center. Withthe support of the Kenyan andAustralian firms, J ames used hisbusiness training to set up a charity

(Kickstart Kids International) whichhe now chairs, and has purchasedland to build a permanent newhome for the orphans. He is nowlooking to replicate his approachfor other orphans in Kenya.

Millennium Cities Initiative (MCI)

Working with the MCI, anorganization focused on fosteringeconomic growth in sub-SaharanAfrica, KPMG firms professionalshave provided economic andcommercial assistance to developreports that encourage foreignand local investment. Theseinclude the opportunity to producebamboo bicycles for use in remoteparts of Ghana.

To find out more, please visit www.kpmg.com/citizenship


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ContactsGlobal Advisory Executive

Alan BuckleHead of Advisory, Global and EMA [email protected]

Paul BroughHead of Advisory, Asia Pacific [email protected]

Mark GoodburnHead of Advisory, Americas [email protected]

Aidan BrennanGlobal Head of Performance & [email protected]

Simon CollinsGlobal Head of Transactions & [email protected]

Michael NolanGlobal Head of Risk & [email protected]

J ohn CondonCOO, Global Advisory

[email protected]

For country-specific contacts, please visit:www.kpmg.com/Global/en/Pages/contactus.aspx

Publication nameGlobalAdvisory brochurePublication no100302Publication dateApril 2010

The information contained herein is of a general nature and is not intended to address thecircumstances of any particular individual or entity. Although we endeavour to provideaccurate and timely information, there can be no guarantee that such information isaccurate as of the date it is received or that it will continue to be accurate in the future.No one should act on such information without appropriate professional advice aftera thorough examination of the particular situation.

Corporate finance services, including Financing, Debt Advisory, and Valuation Services,are not performed by all KPMG member firms and are not offered by member firms incertain jurisdictions due to legal or regulatory constraints.

2010 KPMG International Cooperative (KPMG International), a Swiss entity. Memberfirms of the KPMG network of independent firms are affiliated with KPMG International.KPMG International provides no client services. No member firm has any authority toobligate or bind KPMG International or any other member firm vis--vis third parties,nor does KPMG International have any such authority to obligate or bind any memberfirm. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMGInternational Cooperative (KPMG International), a Swiss entity.

kpmg.com

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