A RAFT of senior hires, expansion into European markets and a brand spanking new office in The Shard, London’s latest iconic sky scraper, has given Paul Clark, Duff & Phelps’ London office managing partner, a lot to be positive about.
“In the last six months we have taken on three managing partners in London and picked up two big ticket complex cross-border non-insolvent restructuring deals,” Clark tells Accountancy Age.
Having once been kidnapped in the line of duty, Clark has faced the worst the insolvency profession has to offer. Throw in the highly-charged and at times bitter administration of Rangers FC and it is little surprise he is keen to talk of future opportunities rather than past problems.
Arguably the biggest cloud, an investigation into whether Clark and David Whitehouse, appointed joint administrators of Rangers in February 2012, were conflicted in their role was squashed last year with Clark and Whitehouse cleared of any conflicts by the Insolvency Practitioners Association.
Clark will only go so far as to describe the Rangers experience as “challenging”. Instead it is the challenge of expanding Duff & Phelps, the UK’s third-largest insolvency practitioner by number of appointments, into new territories and moving into new geographies that Clark is keen to talk about.
“Europe is a really important growth area for us,” Clark explains. “At the moment we have the vast majority of our headcount and proportion of revenue in the US. We would like to balance that out and grow outside the US.”
Currently, Duff & Phelps’ single biggest office in Europe is in London. The firm has offices in Amsterdam, Paris and Munich, while its latest office opened in Madrid in March. Headed up by Javier Zoido, a Spanish national who joined Duff & Phelps in 2006, the office will expand its coverage of the Spanish market and take advantage of greater needs for valuation and corporate finance advisory services as the country’s economy improves.
“We definitely see Spain as growing in terms of the service lines. We only offer valuation services out of the office, but I would like to think we could eventually also offer restructuring and M&A. It will become a full serviced office over a period of time,” Clark says.
Structurally, too, there have been big changes at Duff & Phelps. In April last year the firm was acquired by a consortium, which included The Carlyle Group, Stone Point Capital & Cie. The deal, estimated to be worth around $665.4m (£429.8m), resulted in the firm de-listing from the New York Stock Exchange.
At the time of the deal, Olivier Sarkozy, Carlyle managing director who leads the firm’s financial services group, told the Wall Street Journal that Duff & Phelps would get “significant growth opportunities” from “regulatory demands, implementation of new accounting policies and requirements from increased corporate disclosure and third-party validation.
Internally, a “strategic decision” was made that the business and its growth aspirations could be better served as a private company, explains Clark.
“The day-to-day position of the company hasn’t changed. We still have the same management structure, the same people running the business at the centre and the same individuals as group heads,” Clark says.
“It hasn’t changed the business other than the shareholder structure, which meant management who had a substantial stake in the public company have retained a big stake in the private company. There is proper incentive around the senior team to make it a success.”
Where the money breaks
A more fundamental change for Clark was when MCR, the firm he co-founded in 2001, was acquired by Duff & Phelps in 2011. The business had grown to be one of the leading restructuring boutiques in the UK, with revenues of £22.5m and about 150 staff, according to the Accountancy Age Top 50 in 2011.
Clearly, joining Duff & Phelps gave Clark and his team access to a far wider array of valuation expertise outside the distressed restructuring space. However, Clark is keen to point out that the firm was already more than insolvency practitioners. The profession, Clark explains, had become much more about finding “consensual restructuring solutions”.
“We embraced that change and rarely talked about the ‘I’ word. We thought of ourselves as restructuring practitioners,” he says.
Nevertheless, moving into Duff & Phelps signalled a major change for the old MCR team, most of whom remain in the business.
“It meant that we had additional capabilities that we didn’t previously. We were almost exclusively restructuring and some advisory, but normally advisory in the distressed space. Duff & Phelps provided valuation expertise, and a breadth of services and a global platform. Of course within the restructuring arena it’s really all about where the value breaks,” Clark explains.
“Who’s in the money, who’s out of the money? That expertise has become really useful with us going to market with our restructuring presence.”
Clark adds the M&A team has been “incredibly useful” because solutions from a distressed situation often results in breaking up and selling parts of the business. “To have M&A colleagues with us within the firm, as supposed to relying on external advisers, has been incredibly useful.”
Indeed, as the business cycle changes Clark expects to see more M&A restructuring opportunities for the firm. “It struck me as to how quickly we went from a period of doom to a happier time. As a firm we seek to grasp those opportunities. The M&A team is very busy. There is a lot of cash out there to spend on deals and we want to be involved.”
Paul Clark CV
1981 to 1986 Bulley Davey, Peterborough based firm of accountants
1986 to 1996 BDO, London – qualified as FCCA and licensed Insolvency Practitioner
1997 to 1999 small practice/own practice
1999 to 2001 Zolfo Cooper (then Kroll Buchler Phillips)
2001 to 2011 MCR
Since November 2011 Duff & Phelps who acquired MCR