The White House recently announced a set of voluntary guidelines for businesses to improve their cybersecurity, and A&M’s Tom Kellermann tells CIO Magazine the standards will elevate the cyber issue to the Boardroom – an important first step.
While Kellermann applauds the government’s endorsement of the National Institute of Standards and Technology (NIST) standards, he adds that more work needs to be done to ensure businesses are fully protected against cyber attacks.

Facebook, Amazon, Google, LinkedIn — one of the reasons for the success of these companies is that they make use of complex networks. Scholarly interest in networks has increased dramatically in the last 10 years due to the growth of online social networks and the ability to access detailed network data in such large volumes that were previously unavailable.

Economists are becoming increasingly aware of the pervasiveness of network information and are rapidly developing new techniques to convert this information into knowledge. For example, in the last several years, in certain circumstances, forensic data analysts have started to use economic network analysis combined with advanced econometrics for detecting patterns of potentially illicit behavior in transactions data. Some common examples include:

• Fraudulent behavior in healthcare claims data
• Financial Ponzi scheme
• Payments made from an unmarked account
• Money laundering activity

In an investigation setting, attorneys and forensic specialists often seek to identify the symptoms of the illicit behavior (usually the misappropriation of money) and then attempt to link the symptoms back to their driver (the person performing the misappropriation). This article highlights the ability of the new science of network analysis to reveal previously unknown relationships, influences and commonality among the actual drivers of the illicit behavior before the symptoms are investigated.

Depending on the scope of the investigation or allegations, the ability to identify the perpetrator (disease) may be more important than identifying the fraudulent or illicit transactions (symptoms). After all, it should be perfectly clear from headlining newspaper articles that events associated with the misappropriation of money are usually caused directly by individuals, not by random chance.

Before we describe how these network analyses work and why they are different from previously used data analytics, we offer a quick introduction to the innovative theory of economic networks. We conclude the article with a case study using an actual qui tam False Claims Act matter where network analysis was used to assist the attorneys in determining that a small number of doctors within a healthcare facility were allegedly working together to inflate medical claims and that this behavior was not systematic through the facility.

Network Analysis

In its most basic form, a network is any collection of items in which pairs of these items are connected in some manner. These connections could be between doctors at a medical facility making similar diagnoses, bank account holders receiving money from common routing numbers, consumers with similar online purchases, etc. Individual members of a network have certain characteristics that describe them within the context of the network. For example, in a social network a member can be central to the network (very social) or can be peripheral (a loner). A member can be the sole link between several groups of members (the diplomat) or can belong very strongly to only one group in the network (the club president).

In studying the ways that networks can be used to detect illicit behavior or to suggest targeted areas of investigation for attorneys, it is important to understand the concept of homophily (pronounced HOME-ah-filly). This is the propensity of network members to select connections with other members who have similar characteristics.

For the purposes of an investigation, this concept is important in establishing a data analytic approach to identifying the fingerprint, or DNA, of a fraudulent scheme or illicit behavior. The assumption that underlies the unique success of this type of analysis is that the perpetrators operate with some degree of regularity that exhibits a pattern in the transaction data which can be revealed only through a network analysis. This is often a reasonable assumption because of the strong and pervasive interaction between an individual and his / her social network:

“Homophily is the principle that a contact between similar people occurs at a higher rate than among dissimilar people. The pervasive fact of homophily means that cultural, behavioral, genetic or material information that flows through networks will tend to be localized. Homophily implies that distance in terms of social characteristics translates into network distance, the number of relationships through which a piece of information must travel to connect two individuals.” [1]

This tendency for “birds of a feather to flock together” is well understood by attorneys and other forensic investigators as they search for accomplices through email traffic, social media posts, friends on Facebook and interviews with close work colleagues and colleagues in the same department. The results of a network analysis can also be very helpful in making a determination whether the illicit behavior was being performed sporadically by a rogue employee or systematically by an administrator at the top.

Investigators are often concerned with the fraud-generating process because people are committing the fraud, not the invoices or the insurance claims. While misstated claims, invoices and receipts may be symptoms of the fraud, they are only the result of the fraud. Detecting the fraud generating process, or root cause, through statistical analysis can be difficult because fraudulent behavior is often:

• Uncommon
• Well considered
• Purposefully concealed
• Time-evolving through different forms
• Team-oriented
• Lacking data

While statistical analyses alone cannot prove that a transaction is fraudulent, they can identify potentially suspicious activity for further review.

Alvarez & Marsal (A&M) Network Analysis Case Study: False Claims Act

A&M was recently engaged to assist on a qui tam False Claims Act case regarding the quantification and identification of fraudulent medical claims. The case involved over 140,000 medical claims where a sample of 2,500 claims was selected and reviewed for suspicious activities. Of these 2,500 medical claims, 161 were identified as being false claims. We initially used the more traditional approaches to identify and predict the fraudulent claims. The traditional types of unsupervised analyses, such as correlations, tabulations, and charts produced little or no results. Even the more sophisticated supervised predictive models, such as logistic regression, produced poor results and had little ability to identify the fraudulent claims.

The primary reason for these techniques’ poor performance is that they fail to incorporate any information about the primary fraud driver — people. Different and more innovative methods were necessary in order to incorporate into our predictive model this notion of people as the primary driver of fraud. This insight as to how to incorporate people into the model came when we discovered that our data identified each doctor who treated each patient who was associated with each and every claim. With this doctor / patient / claim-specific information, we created a network of doctors, where each doctor is a member of the network and each connection between a pair of doctors indicates that the doctors treated at least one patient in common.

When doctors treat the same patient, it is very likely they would have interactions with one another and thus know each other. This information then allowed us to create a network graph of doctors, detailing the relationships and the extent of interactions that the doctors had with one another and, more importantly, how these interactions were related to the fraudulent claims. Below is a representative example of the network of doctors, where the doctors associated with patients with fraudulent claims have been marked as a red node.

Doctor Network defined by common patients:

By creating a doctor network from the actual claims data, patterns associated with the fraud begin to emerge to which the more traditional methods are blind. One of the obvious features of this doctor network is homophily; that is, doctors who are associated with fraudulent claims are more likely to be connected to other doctors who are also associated with fraudulent claims. In other words, “fraud begets fraud.” In fact, of the 18 doctors who were associated with fraudulent claims only 2 were not connected with another doctor who was also associated with fraudulent claims. Stated another way, 16 of the 18 doctors who were associated with a fraudulent claim were connected with at least one other doctor who was also associated with a fraudulent claim.

A&M then extracted this network information, how doctors knew one another, and integrated it back into our original predictive model.[2] With the introduction of information garnered from the doctor network into our original predictive model (a logistic regression), our results improved considerably. The original predictive model only identified 1 of the 161 (0.6 percent) fraudulent medical claims, while the network-enhanced predictive model correctly identified 43 of the 161 (27 percent) fraudulent medical claims. The network-enhanced model also improved on its positive predictive ability; that is, when the model predicts that a medical claim is fraudulent, what is the probability that the claim is truly fraudulent. This is often described as the “true given true rate.” The original statistical model predicted 8 fraudulent claims, of which only 1 was truly fraudulent, indicating that the model only had a 1/8, or 12.5 percent positive predictive ability; while the network-enhanced model now predicted a total of 65 fraudulent claims of which 43 were correctly identified, for a 43/65 or a 66 percent positive predictive ability.

These network enhancements to the predictive model improved the model’s performance and ability to identify the fraudulent claims. They transformed the original model, which had very little ability to assist in identifying any further avenues of investigation into the fraud, into a tool that can greatly assist forensic professionals in identifying further avenues of investigation.

[2] Specifically, network statistics such as the doctor’s degree (number of connections), betweenness (number of shortest paths in the network that traverse through a member), closeness (average distance that each member is from all other members in the network) and modularity (measures groups, clusters or communities) were integrated into our original predictive model.

Michael Salve, Ph.D.
Managing Director
+1 212763 1970

Robert Fuite, C.F.A., M.A. contributed to this article.

For More Information

Economic, Damages and Valuation Disputes

An Interview with Roland Cloutier, Chief Security Officer, ADP
In the recent 'Action Matters' Q&A titled: “The Best Cyber Defense is Offense,” A&M Managing Director Tom Kellermannpinpointed the need for an evolution in corporate cyber security leadership, explaining: “We expect to see more companies bring on C-level executives to help bridge the gap between business and IT with the shared goal of keeping critical systems and data secure.”
One such leader, Roland Cloutier, Chief Security Officer at ADP, sat down with Action Matters to discuss how the cybercrime landscape is changing.
Action Matters (AM): Most people have heard of CEOs, CFOs and CIOs. Could you tell us a bit about the role of a CSO?
Roland Cloutier: I feel privileged to work for ADP in the role of Chief Security Officer (CSO). ADP is one of the largest providers of business processing and Cloud-based solutions to employers and automotive dealerships around the world. As CSO, I am the senior-most corporate executive responsible for the global management of “strategic converged security” which includes cyber, risk, privacy and physical security. In my role, I directly report to ADP’s Chief Financial Officer.
As CSO, I lead all global business protection programs for ADP’s services in 120 countries. My team includes more than 200 security, risk and privacy practitioners globally. We work hard to protect trillions of dollars in money movement, as well as the information of 60 million users and 750,000 global clients. I have assembled a very accomplished senior executive staff that is mapped to each major functional area within ADP. Roles reporting to me directly are: Chief Information Security Officer, Chief Privacy Officer, VP-Operational Risk, VP-Corporate Security, VP-Trust Services and Divisional Level Chief Business Security Officers.
AM: How is a CSO different from a traditional information security officer?
Roland Cloutier: As a converged security executive, I have total oversight, operational control and management of all security, operational risk and privacy functions world-wide. Essentially, I have the transparency, data and operational control to see issues cross-business and cross-discipline. This insight allows for making informed and rapid decisions.
In addition to managing ADP’s global corporate security strategy and our Threat Management Centers in the U.S., India and Philippines, I also lead ADP’s award-winning, trusted platform security infrastructure and its integrated threat management and response ecosystem. Most security executive positions either oversee information security or physical security, but rarely cross multiple disciplines.
AM: What has changed about the current cybercrime landscape?
Roland Cloutier: Today, cybercrime is run like any well-backed, staffed and automated company. Cyber criminals attract, train and retain some of the best talent in their “industry” and have made it into a high-paying career. Cyber criminals have created ecosystems of supply chain and market delivery models, investing millions into automation.
Additionally, their “business” focuses full-time on overcoming digital security controls and capturing every piece of data they find. These are very different adversaries than hackers that hunt for credit card information or deface public websites.
AM: Where are these elite hackers based?
Roland Cloutier: We have seen very skilled cyber criminals in Eastern Europe, China, the U.S. and the Middle East.
AM: How can Corporate America evolve to tackle this new threat?
Roland Cloutier: Like any other corporate governance program, oversight should be used to create a trusted foundation of assurance. The assurance models are, and should be, based on business controls. In the context of cyber protection, controls can run the spectrum from policies to technology, operational platforms and management.
Governance and oversight should include controls aligned with the industry and markets served, including a complex set of actuated risk measurements for the level of controls in place. This assurance needs to be based on the identified and reported risk at an enterprise-wide level. It is essential that fact, evidence and metrics-based validation should all be a part of the oversight to align corporate risk decisions with the validity of corporate risk management.
AM: What do you consider to be the best practice in managing virtual supply chain risk?
Roland Cloutier: I do not believe that any supply chain risk can be “virtual.” Either there is or isn’t risk in the supply chain. Whether it’s technically-based, physical or monetary, supply chain risk is a very real part of business.
With regards to cyber, privacy and risk management components of supply chain, I believe that an established, tiered approach with effective “Know Your Supply Chain” (KYSC) controls and continuous monitoring is critical.
Companies need to ensure they have the capability to drive vendors through a rigid process, including the following: intake, evaluation, on-boarding, education, delivery assurance, continuous monitoring, enforcement and off-boarding. From a cyber-perspective, vendors should be assessed in a manner that is equal with their impact on the supply chain. A rigorous, risk-tracking mechanism should be in place, congruent with the vendor’s contract responsibilities.
A process should also be established to re-evaluate the vendor’s exposure on a consistent or as needed basis. These controls will help minimize any cyber risk initiated by a vendor – a measure that is critical to a company’s operating integrity.
For More Information:
Cyber Protection

Unlike other sectors of the economy, the wholesale lack of price transparency, combined with limited technical understanding by consumers, has resulted in significant price variation for healthcare services across the country.¹ Pricing is a function of payer mix, reimbursement, regulation, revenue cycle management, expense management (or lack thereof), investment and governance. Pricing negotiations for services rendered are often behind closed doors and the bills patients receive offer little ability for employers and consumers to gauge the appropriateness of the cost of care.

Rising consumer out-of-pocket costs reaching the threshold of affordability, combined with data transparency initiatives and the emergence of narrow networks (restricting consumer choice) and reference pricing (the maximum percentage of Medicare paid by the employer beyond which the consumer is responsible for 100% of the incremental costs) are beginning to fundamentally alter the provider pricing paradigm.

Rising Costs Affecting Consumer Access to Healthcare

Employee out of pocket expenditures, inclusive of insurance premium cost share, deductibles, co-payments and co-insurance, have grown rapidly during the past few years and are now approaching $5,000 per annum for family coverage. High deductible health plans (HDHPs), or those with a minimum deductible of $1,250 for self-only coverage and $2,500 for family coverage, were formerly considered to be catastrophic health plans due to their low monthly premiums. Higher out-of-pocket costs are affecting consumer behaviors. Reduced cost-shielding by insurance plans has encouraged consumers to take into account the cost of out-of-network utilization, prescription pharmaceuticals, treatment alternatives and other factors in their decision making.²

Cost shifting to employees, combined with the residual impact of the Great Recession, is also affecting demand for healthcare services; national health expenditure growth has averaged only 4.0% during the past few years. Approximately 30% of all consumers have deferred visiting a physician, undergoing a test, filling a prescription or complying with treatment due to economic reasons. In one-third of all cases, the consumer believes treatment was delayed for a serious condition.³

A mid-2013 biennial survey by the Commonwealth Fund of “sicker” adults – “those who met at least one of four criteria: rated their health as fair or poor; reported receiving medical care for serious chronic illness, injury, or disability in the past year; or had surgery or had been hospitalized in the past two years.” – found that 37% of Americans deferred treatment because of costs.⁴ These data are worrisome as deferral of treatment, especially in the “sicker” cohort often results in worse outcomes and higher costs, as potentially preventable or reversible conditions progress to more severe forms.

NYS Department of Health Lifting “Veil of Secrecy” on Hospital Pricing

The New York State (NYS) Department of Health, as part of its Statewide Planning and Research Cooperative (SPARCS) and Institutional Cost Report (ICR) hospital data submission requirements, recently made public a dataset containing a largesse of information including “the volume of discharges, All Payer Refined Diagnosis Related Group (APR-DRG), the severity of illness level (SOI), medical or surgical classification the median charge, median cost, average charge and average cost per discharge“.⁵

A price analysis of joint replacement procedures suggests a price variance approximating 100% among major New York City hospitals; the actual New York Presbyterian (NYP) Hospital Weill Cornell Medical Center knee-replacement price is deemed an outlier. Lenox Hill Hospital, NYP Weill Cornell and NYU Hospital have consistently higher prices than those of other hospitals. Mt. Sinai Hospital, another well-respected institution, has lower prices. Based on this data, employers insuring a worker population undergoing a large number of joint-replacement procedures may consider including an institution into a narrow network or reference pricing scheme whose average prices are 10% to 15% above the mean.

Orthopedics is often a highly profitable service line for hospitals. Orthopedic surgeons focusing on hips and knees have a median salary of $760,426.⁶ Interventional cardiology is also a profitable service line, with specialists earning an average of $562,855.⁶ The price variation between the highest and lowest-priced hospitals for percutaneous trans-catheter angioplasty (PTCA), a commonly performed interventional cardiology procedure, in patients suffering a heart attack is 114%, though the variance from the average is less than that of joint replacement. The price variation between the highest and lowest priced hospitals for heart failure, a condition not usually associated with a procedure, is just 60% – a significantly smaller (though still substantial) amount.

Price Variation Also High for Outpatient Procedures, Tests and Infusions

Hospital systems are nearly always higher priced than physician practices for a wide variety of outpatient procedures, diagnostic tests and drug infusions. Hospital outpatient departments typically cost one and one-half to three times more than ambulatory surgery centers.⁷ Diagnostic imaging premiums range from 40% to 400% depending on the type of test: X-Ray, CT, MRI or ultrasound.⁸ Specialty-drug infusions, those covered under the medical benefit are often far higher in hospital outpatient facilities.⁹ Opportunities exist to identify high cost site of care without necessarily affecting the physician-patient relationship.

In 2007, an Institute of Medicine (IOM) roundtable indicated no definitive relationship, based on evidence-based medicine, between regional differences in spending, and the “content, quality and outcome of care”.¹⁰ Another study funded by the Commonwealth Fund examining the relationship between quality and cost showed similar results.¹¹ According to a recent report in the Annals of Internal Medicine, “evidence of the direction of association between health care quality and cost is inconsistent. Most studies have found that the association between quality and cost is small to moderate, regardless of whether the direction is positive or negative.”¹²

The reputation of an organization and a physician are the primary determinants of provider selection.¹³ Other important determinants include network inclusion, appointment availability, family or friend recommendation and distance to clinic.

Measuring clinical excellence is complex, but increasingly within our reach given the rise in utilization of electronic medical records. Metrics can be applied broadly to a population (e.g., preventable hospital stays), institution (e.g., hospital re-admission rates) or a condition (e.g., heart attack – percentage of patients receiving aspirin at arrival, percutaneous coronary intervention within 30 minutes of arrival, and aspirin, a beta blocker or if appropriate, ACE inhibitor or Angiotensin II Receptor Blockers (ARB) upon discharge; and 30-day all-cause mortality).

The Medicare Value-Based Purchasing metrics, though a useful start in inserting financial incentives to reward hospital performance, does not address all complications specific to our example, hip and knee replacement (e.g., infection and re-operation rates). It does, however, address critical issues such as the use of prophylactic antibiotics and venous thromboembolism (blood clot) prophylaxis, which are complications that can lead to very poor outcomes for a variety of procedures.

Conclusion

Two convergent trends pose risks to a variation in provider pricing based solely on site of care, reputation and / or service excellence, irrespective of differences in outcomes. Rising out-of-pocket consumer costs reaching the threshold of household affordability is affecting consumer access and choice. Data transparency initiatives by the Centers for Medicare & Medicaid Services (CMS) and specific state health departments, combined with the emergence of private companies offering online price comparison services to employers, have lifted the “veil of secrecy” of provider pricing.

Opportunities exist for employers to apply narrow network and reference pricing strategies not only to inpatient procedures and stays, but also to outpatient ambulatory surgery services, diagnostic imaging and specialty drug infusions undertaken in hospital-owned facilities.

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¹ International Federation of Health Plans. 2012 Comparative Price Report: Variation in Medical and Hospital Prices by Country; April 2013.

² EBRI/MGA Consumer Engagement in Health Care Survey, 2012.

³ GALLUP Well-Being. Costs Still Keep 30% of Americans From Getting Treatment. Dec. 9, 2013.

⁴ 2011 Commonwealth Fund International Health Policy Survey.

⁵ New York State Department of Health. Health Data NY.

⁶ Medical Group Management Association (MGMA), 2012

⁷ Stegman M. Hospital Outpatient Surgery Versus Freestanding ASC Costs and Reimbursement. Journal of Health Care Compliance; March-April, 2005.

⁸ Area Hospital Imaging Costs vs. Intermountain Medical Imaging.

⁹Einodshofer M, Duren L. Cost Management through Care Management, Part 2: The Importance of Managing Specialty Drug Utilization in the Medical Benefit; September / October 2012 Vol 5 (6).

¹⁰ McClellan M, McGinnis JM, Nabel J, Olsen L. Institute of Medicine. Evidence-Based Medicine and the Changing Nature of Healthcare: Meeting Summary (IOM Roundtable on Evidence-Based Medicine); 2008. Table S-1, page 10.

¹¹ The Commonwealth Fund. Hospital Cost of Care, Quality of Care, and Readmission Rates: Penny Wise and Pound Foolish? Archives of Internal Medicine, Feb. 22, 2010; 170(4):340–46.

¹² Hussey P, Wertheimer S, Mehrotra A. The Association Between Health Care Quality and Cost: A Systematic Review. Annals of Internal Medicine 2013; 158 (1):27-34.

¹³ Abraham, Jean, et al. "Selecting a provider: what factors influence patients' decision making?" Journal of Healthcare Management/American College of Healthcare Executives 56.2 (2011): 99.

Key Contacts:

Guy Sansone
Managing Director
+1 212 328 8513

Steven Bussey
Managing Director
+1 212 763 9662

David Gruber, MD
Director of Research
+1 212 763 9801

For more information:
Healthcare

2014 is poised to be a year of accelerating deal activity due to strong market fundamentals and pent-up demand by both corporate and strategic investors, according to a new report released by Alvarez & Marsal (A&M), a leading global professional services firm. Analyzing key financial services industry dynamics and deal drivers, the report forecasts substantial M&A activity growth across the banking, insurance and asset management sectors.
“Stronger macroeconomic fundamentals and improving liquidity and capital levels have shifted the focus of financial services firms from preservation and strategic rationalization to growth.” said Osman Khan, Managing Director and Financial Services M&A Leader with A&M’s Transaction Advisory Group. “With weak organic growth prospects and increasing desensitization to continued regulatory pressure, financial services firms will seek growth via acquisition to expand product capabilities, realize cost synergies and develop scale in an increasingly commoditized environment.”
Among the factors expected to spur 2014 M&A growth across the financial services industry, the report points to:

• A steadily improving macroeconomic environment and historically low interest rates, which will drive the abundant availability of leveraged credit, giving buyers and sellers the confidence to push forward with deals
• An increasing desensitization to continued regulatory pressure across the industry; savvy investors will look through the regulatory “white noise” and execute deals rather than continue to wait for future clarity
• Recognition that technology and disintermediation is driving the need for innovation and scale to remain competitive
• Stronger credit performance, which is already leading  to greater liquidity and capital levels; with weak organic growth prospects, firms will seek to grow via acquisition or will feel pressure to return capital to shareholders
• Increasing commoditization, which will drive the need for growth by acquisition in order to drive product, geography and margin expansion and realize cost synergies

 The full report, entitled “Rising Tides: A Case for Growth – 2014 Financial Services M&A Trends,” analyzes data obtained from SNL Financial as of January 1, 2014. In addition to forecasting 2014 growth, it examines the factors behind deal activity in 2013.
About Alvarez & Marsal
Companies, investors and government entities around the world turn to Alvarez & Marsal (A&M) when conventional approaches are not enough to activate change.
Privately-held since 1983, A&M is a leading global professional services firm that delivers performance improvement, turnaround management and business advisory services to organizations seeking to transform operations, catapult growth and accelerate results through decisive action. Our senior professionals are experienced operators, world-class consultants and industry veterans who draw upon the firm's restructuring heritage to help leaders turn change into a strategic business asset, manage risk and unlock value at every stage.
When action matters, find us at www.alvarezandmarsal.com.
Follow A&M on Facebook, LinkedIn and Twitter.

2014 is poised to be a year of accelerating deal activity due to strong market fundamentals and pent-up demand by both corporate and strategic investors, according to a new report released by Alvarez & Marsal (A&M).

In Rising Tides: A Case for Growth – 2014 Financial Services M&A Trends, A&M analyzes the key industry dynamics impacting deal activity in 2013, and future drivers of M&A growth across the banking, insurance, and asset management sectors.

Read the full report.
 

Leading global professional services firm Alvarez & Marsal (A&M) has formed a dedicated global Enterprise Services practice to guide companies through reframing their operations to better compete in the evolving as-a-service economy.  Several accomplished Enterprise Services professionals have joined the practice, significantly enhancing and expanding these capabilities.  They include Managing Directors Peter Allen and Mark Krueger; Senior Directors John Pirtle and Kevin Smilie; and Senior Advisers Cheri Brown and Ed Martinez.
“Companies are increasingly recognizing that the capabilities and assets that enabled prior success may now hinder their ability to innovate and compete in a dramatically changing landscape,” said Peter Allen, Managing Director with Alvarez & Marsal’s U.S. performance improvement practice and head of A&M Enterprise Services.  “As the world economy is increasingly defined as a service economy, continued relevance and future growth for many organizations will require re-imagining how business is conducted and radically different ways of thinking about leveraging assets, people, technologies and partners. Building on A&M’s long history of helping companies transform their business models, this team will help companies to ignite new sources of revenue growth and drive performance improvement through innovation.”
The A&M Enterprise Services team focuses on six areas of revenue growth and performance improvement: 
-       Commercialization: Converting internally-oriented capabilities to a market offering, i.e. becoming a service provider
-       Product-to-Service: Repositioning product-oriented market offerings as managed service offerings
-       Divest and Contract: Contributing assets to externally oriented market ventures
-       As-a-Service: Adopting services integration architecture and orienting resources around defined services
-       Shared Services: Organizing operations to achieve leverage in people, processes and technologies
-       Outsourcing: Transferring legacy assets and refreshing service relationships to meet “as-a-service” principles
The recently added Enterprise Services professionals join an experienced global team that includes U.S.- and Europe-based Managing Directors Cody Chenault and Malcolm McKenzie, as well as Senior Directors Richard Austin, Matthew Bagley, John Keenan and Christine Muris.
About Alvarez & Marsal
Companies, investors and government entities around the world turn to Alvarez & Marsal (A&M) when conventional approaches are not enough to activate change.
Privately-held since 1983, A&M is a leading global professional services firm that delivers business performance improvement, turnaround management and advisory services to organizations seeking to transform operations, catapult growth and accelerate results through decisive action.  Our senior professionals are experienced operators, world-class consultants and industry veterans who leverage the firm's restructuring heritage to help leaders turn change into a strategic business asset, manage risk and unlock value at every stage.
When action matters, find us at alvarezandmarsal.com
Follow A&M on Facebook, LinkedIn and Twitter.

 A Conversation with Vikram Utamsingh
Despite high inflation, low growth, high interest rates and a declining rupee, India has seen heightened interest from the private equity community. Action Matters sat down with Vikram Utamsingh, an A&M Managing Director and co-head of A&M India who for the past 15 years has overseen M&A transactions in the country, to discuss the unique opportunities the Indian market offers to investors.
Action Matters (AM): Both Indian M&A deal volumes and value have declined over the last three years. Do you find the deal-making appetite in India is sliding as well?
Utamsingh: While we have seen some decline in interest from global multinational companies for acquisitions in India, private equity interest for deals has increased. Although, the Indian private equity (PE) industry does include a portfolio of companies that are in trouble, India currently presents some highly compelling long-term opportunities in domestic-driven sectors like healthcare, consumer, food and agriculture – as these sectors are growing at double-digit rates.
In addition, the sharp decline in the Indian rupee means that these investments are cheaper in U.S. dollars and so the valuations in U.S. dollars are not unreasonable. The current portfolio of companies managed by private equity is another source of opportunity and in 2013 almost 30 percent of PE exits were through secondary sales.
AM: What role will the typical Indian promoter play in a slower exit process?
Utamsingh: Previously, investors wanted a minimum assured return with little oversight of the business. Promoters were left, relatively unchecked, to run the business. Today, investors are more cautious in selecting their deals and are communicating to promoters that they will only invest if they can participate and support operations. This is why you see fewer investment professionals being hired and more operating specialists working across the portfolio firms.
The reality is investors still don't want to interfere, but they want to have the ability to participate in improving operations, if the need arises. This is a tough balance to maintain as most Indian PE deals are minority investments and so have negligible operating rights.
AM: It sounds as though the PE landscape in India is changing dramatically. Can you provide a view from the inside?
Utamsingh: In India, many of the businesses are family-run and disputes among family members are a risk. Today, clashes between PE investors and business owners are increasing, especially where business owners have misused funds. PE firms are also starting to assert themselves if the business is not performing. And there is better recognition from the business owner.
Earlier, for a typical Indian business owner, PE investors were viewed as an alternative source of capital to debt or the capital markets. This is now changing as PE firms begin to differentiate themselves and demonstrate how they can add value to the underlying business.
At the same time, PE firms have one or two operating partners across a portfolio of 10 to 15 companies. They can’t spend all their time in these firms. If there are issues in several portfolio companies, outside assistance is needed in order to see a return.
AM: Given this, where should savvy investors focus their efforts?
Utamsingh: Regardless of what happens over a year or two in the short term, private equity will be in India for the long term. The Indian PE market is still at a nascent stage – not even one full investment life cycle has been completed. Foreign PE funds are very interested in this country, with investment by foreign PEs up 40 percent in 2013 over 2012.
PE firms with capital to deploy and those without an overhang of unrealized past investments will fare best in this economic environment. Further, firms that can offer a mix of equity and structured debt will probably get access to better deals. In addition, more opportunities to invest or buy will emerge as promoters show more willingness to exit businesses that have substantial debt or need capital to sustain and grow.
These distressed businesses make attractive acquisition targets – provided the underlying business model is viable. Similarly, local businesses that are open to the professional network that PE investors deploy can thrive by leveraging these resources.
Finally, we are also seeing lenders beginning to move against distressed businesses. In fact, Alvarez & Marsal is the only firm that has been hired by the banks to turnaround distressed businesses to date. Over time, if these businesses can be turned around, they would make good acquisition targets for PE firms.
Given this, we expect to see stronger engagement among PE investors. More companies will bring on operational experts to help improve performance. With the right partner, PE investors can transform the exit process before the lifecycle is completed.
 For More Iinformation
Alvarez & Marsal India
Private Equity Services

Alvarez & Marsal (A&M), a leading global professional services firm specializing in performance improvement, turnaround management and business advisory services, today announced the expansion of its India business with the launch of dedicated Corporate Finance and Commercial Due Diligence practices. To grow the firm’s India-based transaction advisory capabilities, Nandini Chopra has been appointed as Managing Director – Corporate Finance while Manish Saigal has been appointed as Managing Director – Commercial Due Diligence. Both will be based in Mumbai.
In order to manage this growth, Vikram Utamsingh, Managing Director and currently head of the India Transactions Advisory Group, has been named Co-Head of Alvarez & Marsal India.
Private equity firms and strategic acquirers require an integrated due diligence approach to achieve corporate and shareholder objectives. The addition of a local A&M Corporate Finance team will enable companies to stay ahead of the curve with strategic insights on mergers, acquisitions and divestitures, financing, restructuring and Financial Advisory services.  Building upon the firm’s dedicated Transaction Advisory Practice in India, the Commercial Due Diligence team will leverage A&M's operational heritage to help clients identify and analyse market opportunities in a competitive private equity deal environment.
Speaking on A&M India’s expansion plans with the new appointments Sankar Krishnan, Managing Director and Co-Head, Alvarez & Marsal India said, “Amidst continuing global economic uncertainty and a new economic paradigm, Indian companies and multinational businesses with operations in India are seeking real solutions to address challenges related to growing operations and managing performance. The new appointments reflect Alvarez & Marsal’s commitment to the Indian market and to partnering with our clients to provide them top professional talent and action-oriented results. Vikram, Nandini and Manish bring in-depth knowledge of the region coupled with breadth of proven expertise in the areas of operational performance improvement and commercial due diligence and will play a pivotal role in expanding A&M’s presence in India.”
Nandini Chopra brings with her over 20 years of experience in M&A, sales and divestitures, JV advisory, PE raises, IPOs, debt syndication and valuations. Prior to joining A&M, she spent over 15 years with KPMG India as a Partner in KPMG Corporate Finance where she led M&A transactions in the Consumer and Retail sectors, and successfully closed marquee cross border transactions. She was also the Head of their Valuations practice.
Manish Saigal specializes in providing advice on Strategy Formulation, Business Feasibility & Planning, Strategic and Commercial Due Diligence, Integration & Separation Advisory, Bid Advisory and Economic Studies. Manish Saigal brings more than 17 years of rich experience in strategy consulting, private equity and M&A advisory projects. Prior to joining Alvarez & Marsal, Manish Saigal led the Global Strategy group (GSG) at KPMG India leading key client relationships with leading PE firms, financial services firms, logistics firms to name a few.
About Alvarez & Marsal
Companies, investors and government entities around the world turn to Alvarez & Marsal (A&M) when conventional approaches are not enough to activate change.
Privately-held since 1983, A&M is a leading global professional services firm that delivers performance improvement, turnaround management and business advisory services to organizations seeking to transform operations, catapult growth and accelerate results through decisive action.  Our senior professionals are experienced operators, world-class consultants and industry veterans who draw upon the firm's restructuring heritage to help leaders turn change into a strategic business asset, manage risk and unlock value at every stage.
When action matters, find us at www.alvarezandmarsal.com.
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Alvarez & Marsal’s Tasneem Azad has been named a world leading Competition and Antitrust practitioner by the 2014 Euromoney Expert Guides.
Using data collated from thousands of questionnaires as well as interviews with senior practitioners and in-house counsel, the Expert Guides series acknowledges specialists of considerable repute in certain aspects of law worldwide.
As a Managing Director for A&M’s Global Forensic and Dispute Services practice in London and co-leader of the European Economics practice, Ms. Azad focuses on the application of competition and regulatory economics.
Read more about Azad’s experience.

Many private equity deals failed to get across the line last year because buyers and sellers struggled to see eye-to-eye over valuations. And while private equity firms are currently sitting on around $265 billion of dry powder, according to data provider Preqin, something clearly needs to be done to more closely align buyers’ and seller’ attitudes towards valuations.
The resolution to this stand-off is not as difficult to achieve as you might think. Indeed the answer lies in an old process that many firms have been neglecting over the past few years.
That process is sales and operations planning. And while it has never been the most eye-catching management tool, for private equity firms looking for exits this year, it could be game changing.  
So what is S&OP? The easiest way to describe it is to examine a hypothetical deal situation.
Imagine you are a buyer and your deal strategy presents you with a choice of potential acquisition targets, each of which is similarly valued.
Company A has a record of 12 quarters of consistently hitting key performance targets, while the management has implemented a process which allows an 18-month rolling outlook and has a large bank of ideas to generate further upside. The signs and early due diligence are all positive.
Company B has had some very good quarters, but also some poor ones. A lack of a strong process means that its outlook cannot stretch beyond six months, resulting in a wide disparity in sales and finance forecasts, and a gross margin experiencing unexpected pressure. Your due diligence tells you that senior management all take responsibility for the business, but there’s no clear line of accountability. The outlook is mixed for any deal.
Which would you buy? On the surface, the two companies can look very similar, but what sets Company A apart is simply that it implemented an intelligent S&OP process while Company B did not.
The history of S&OP dates back to the 1980s, when it was seen by many as the business management process of choice. It allowed leadership teams to achieve focus and alignment across all functions of the organization through monthly planning activities.
Implemented properly, it was a powerful way of restoring confidence in the growth of the business and building a distinct competitive advantage.
In our experience, most portfolio companies we come across could improve their approach to S&OP. When a private equity firm is looking to keep its investor base happy, it needs to execute profitable exits. And a poorly performing portfolio company, with a poor S&OP process, does not present good exit options – to trade buyers or other private equity firms.
S&OP requires senior leadership to lead and direct from the top, which includes everything from the basics of running effective monthly meetings to ensuring collaboration across the whole business.
The benefits of S&OP are numerous. It improves both revenue and profit growth, cashflow forecasts and reduces costs and working capital. There are soft benefits too, with closer collaboration leading to a greater harmony - both internally between teams, and externally with customers and suppliers.
Put simply, portfolio companies with better S&OP processes are more attractive to buyers. The hard and soft benefits outlined above result in greater transparency and tangible value creation.
Private equity firms can gain a real advantage by taking the S&OP process seriously; not only will their portfolio companies see the benefits, we may also start seeing some of that dry powder being used up.
 
Richard Loretto is a Senior Director with Alvarez & Marsal in London
This article originally appeared in the March 3, 2014 issue of Private Equity News. Re-published with permission.