Business in high demand as a result of the economic crisis
Still integrating staff and rebranding new acquisitions in APAC
Thriving in the silver lining
FTI Consulting thrives when times are toughâ€”which means that business has been very good recently. The firm mainly focuses on services for companies that are facing trouble, whether economic, legal or regulatory. The firm boasts 15 to 20 percent of the world market share in economic consulting. 16 percent of its revenue currently comes from overseas, with dozens of offices in Europe, Latin America and Asia, and plans to continuing expanding its activities abroad. In recent years, FTI has grown both its domestic and international operations through a number of acquisitions and currently owns eight subsidiaries. In all, FTI operates 80 offices worldwide and employs 3,500 staff.
There are few industries that FTI won't take on, with clients coming from sectors including automotive, chemicals, retail, pharmaceutical, health care, insurance, real estate, financial services, energy, construction, communications, and media and entertainment. Clients are often big fishâ€”97 of the top-100 law firms and nine of the top-10 bank holding companies worldwide, as well as 85 percent of the Fortune 100. President and CEO Jack Dunn told Accountancy Age that the firm "would like to have a global brand where companies feel as comfortable using us as the Big Four."
The nuts and bolts
FTI divides its services into corporate finance/restructuring, economic consulting, forensic and litigation consulting, strategic and financial communications, and technology. The corporate finance division focuses on financial and transactional issues, gathering a wide range of resources and experts to hunt for solutions. The economic consulting arm comprises two main sections: Compass Lexecon, which offers financial analysis of litigation, policy and regulatory issues all over the world; and Network Industries Strategies, which helps network industries like telecommunications, transportation, energy and electric power to move out of regulation and into competitive markets. Forensic and litigation consulting was the original focus of the firm way back in the 1980s, and it continues to be a major revenue generator. The technology group helps clients use technology to improve security, data discovery and analysis, and workflow management.
Strategic communication is handled through the firm's global subsidiary, FD (formerly known as Financial Dynamics), which concentrates on improving brand, reputation and valuation through communications. FD was named the Asia Pacific Public Relations Firm of the Year in 2008 by the Financial Times and Mergermarket, and International Consultancy of the Year in 2006 by PRWeek. Other prominent subsidiaries of the firm are FTI Capital Advisors, LLC, which helps clients find and execute investment opportunities, and FTI Palladium Partners, which provides interim management for companies on the rocks, having its experts step in as CEO, CFO, COO or CRO (chief restructuring officer).
Buying into the East
FD was acquired by FTI in 2006 as part of a strategic five-year plan to generate revenue outside of the U.S. The purchase gave FTI immediate inroads into Asia, Europe and the Middle East, where FD had established offices. The firm continued its expansion into Asia in 2007 by purchasing Occasions, a Hong Kong-based corporate and financial communications consultancy, and later, in October 2008, by acquiring Perth Consultancy, one of Australiaâ€™s top financial communications firms.
Today, FTI and its subsidiaries have a number of offices across the Asia Pacific region, with operations in Beijing, Guangzhou, Hong Kong, Melbourne, Perth, Shanghai, Singapore, Sydney and Tokyo. The firm operates one of the largest financial communications practices in Greater China, as well as one of Australiaâ€™s largest corporate communications practices. Some notable clients across the region have included Air China, the Korean Stock Exchange, and SK Energy.
A bull in a herd of bears
As the most recent economic bubble began showing signs of weakness in 2007, FTI's revenue jumped 41 percent, soaring past expectations for 2007 by around US$100 million. Then, against the backdrop of a worsening global financial crisis, the firmâ€™s revenue continued its upward swing the following year, climbing by nearly 30 percent to US$1.29 billion in 2008.
In April 2008, Forbes reported that "FTI's business is strong and is seeing a surge in demand" connected to the credit crunch. Since then, the firm has continued to excel, leveraging its expertise in practice areas that are in high demand as a result of the economic downturn. The stream of distressed businesses knocking on FTI's door has been long and steady. For example, the firm's forensic accountants and forensic computer consultants collected, processed and analyzed data for an internal investigation at New York-based financial services firm Refco. When troubled U.S. mortgage giant Freddie Mac was audited, FTI helped it investigate transactions and accounting policies.
When describing FTI, analysts love to use the phrase "strong fundamentals." Investors jacked up FTI's stock price by 121 percent in 2007, prodded by earnings per share that increased 92 percent over the course of the year. In March 2009, the firm released an earnings forecast predicting that its revenue would grow by 12 to 20 percent for the year, and that it was planning to hire close to 500 additional staff by 2010, bringing the company total to around 4,000 employees.
Wanting to party with everyone else
However, too much focus on succeeding during hard times has occasionally left the firm vulnerable when the economy is on an upswing. In 2003, 80 percent of the firm's revenue came from its restructuring services, but in 2004, its earnings before interest, taxes, depreciation and amortization (EBITDA) dropped by 18 percent thanks to a strong U.S. economy.
Tired of this boom and bust cycle, FTI began a strategic shift in direction in 2004. By 2007, thanks to a variety of acquisitions and concentrated diversification, the firmâ€™s revenue from its restructuring division was only 26 percent, with its technology and strategic communications practices gaining in prominence. Chairman Dennis Shaughnessy remarked to Kiplinger's Personal Finance Magazine in April 2008, "People ask us: Do you root for good times or bad times? We root for interesting times." However, as the firm's recent rise in fortune shows, the areas in which the firm has expanded continue to focus on distressed companies, even if not specifically on restructuring.
Snapping up the leftovers
Changing direction through acquisitions is nothing new for the firm. In fact, its whole focus on restructuring began with the buyout of two financial consulting firms in 1998. Before that, the firm had specialized in litigation consulting. Founded by Daniel W. Luczak and Joseph R. Reynolds Jr. in 1982 as Forensic Technologies International, the fledgling firm began its existence concentrating on finding and preparing expert witnesses.
FTI began a series of acquisitions in 2006, which continue to this day. By early 2009, the firm had purchased more than 10 separate companies. Some recent acquisitions include the January 2009 pickup of Canadian communications consulting firm The Element Agency, the July 2008 purchase of eDiscovery software provider Attenex Corporation for US$88 million in cash, and the April 2008 purchase of private real estate consulting firm Schonbraun McCann Group for US$125 million in cash and stock. The group continues to operate under its own name as the real estate division of the firm's corporate finance practice.
William Sutherland, an analyst at investment firm Boenning & Scattergood, commented that the benefits of the FTI's shopping spree would really start to kick in during 2009, and maintained his rating of the firm as "market outperform." Plus, "acquisitions" don't only refer to companiesâ€”as CEO Jack Dunn told Kiplinger's, another upside of doing well in hard times is that the firm can hire "rock star" consultants with little competition.
7700 South Flagler Drive
Suite 1500 â€“ West Tower
West Palm Beach, FL 33401
Employer Type: Public
Stock Symbol: FCN
Stock Exchange: NYSE
President & CEO: Jack B. Dunn
2009 Employees (All Locations): 3,300