Deloitte TaxMax - The 46th series Future of Finance
Transcript of Deloitte TaxMax - The 46th series Future of Finance
Ho Sai Weng l 25 November 2020
Deloitte TaxMax - The 46th seriesFuture of Finance
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 2
With the level of development in finance being disrupted by the introduction of new technologies, the need to rethink and transform the role and value-add of finance has become increasingly significant.
The role of finance is rapidly changing
AThe gap between the lowest and leading functions has never been larger.
Ad
ded
valu
e
Lowest
quartile
performed
(Leading)
Finance of
tomorrow
Desktop computing
Decentralorg.Data
capture
Accountingmindset
Manual
Hin
dsig
ht
Accounting
THE SHIFTIn
sig
ht
Performance &profitability
tracking
Big data &analytics
Mobileservices
Sharedservice
BusinessPartnering
mindset
Business partnering
THE BIG SHIFT
Fo
resig
ht
Robotics
Analytics
B
Cognitivecomputing
FinanceFactory
Businesstransformation
mindset
Business transformation
1340 1970 1980 1990 2000 2005 2020 20252010 2015
The current development is exponential – the next step is an even greater jump.
B
Activity focus
Double entrybook-keeping
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 3
The composition of finance responsibilities is likely to change significantly in the years to come, with greater emphasis on Business Partnering and providing business insights to company management.
Finance needs to adjust to be able to meet increasing demands
Data managem
entSilos and
disorganized
data
Transactional processing
Manual processing
Business controllingFinance-centric business controlling
Data managementStructured data across the
value chain
Transactional processingFinance Factory
Financial reporting
Backward-looking static reporting
Foundation Leading
Business insightAnalytical insights and
financial and operational data
Common ERP
Robotics
Outsourcing
Automation
E2E process
CentralizationContinuous improvements
Self-service
StandardizationGBS
High valueprocesses
Master datamanagement
Global COA
Standard master data
MDM CoE
BI investments
Transformational levers
Business partneringNew perspectives,
constructive challenge and catalyst for business
performance management
Mobile devicesDashboards
Front-end
Predictive analytics
Reporting factory
Real time
Visualization
Combineddata
Optimized performancemanagement
Established BPorganization
Business acumen
Consulting skills
Focused value opportunities
Value maps
Cost transparency
Data scientist
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 4
Finance in a digital world - Lifting the fog of uncertainty
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 5
Finance of the future: Digital finance
Integrated data governance across
systems
Periodic reporting will no longer drive decisions
Touchless transaction
processing will be enabled through automation
Work is completed through a combination of
People, Robots and Algorithms
Self-service to become the norm
Organisations will be
insight-driven enabled
through connected data sets and analytical tools
What we will see MORE of
Simplification of processes and reduction of unrewarded complexity
Blurring of functional borders and common data usage as finance moves deeper into other functional areas for data & insights
Automated monthly close and forecasting activities
Technology that supports a nimble and dynamic culture
What we will we see LESS of
Decentralised processes relying heavily on spreadsheets
Siloed systems which are built for one-off tasks, and supplemental data from outside systems
Automation
Data governance
Insights & Analytics
Self-service
Real time finance
Operating Model
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 6
Digital finance technologies
Advanced analyticsAnalytics has long been partof the finance arsenal, butnew techniques are helpingbusiness people tackle thecrunchy questions withinsightful answers.
Process roboticsProcess robotics automatestransaction processing andcommunication across multipletechnology systems.
Cognitive computingCognitive computing and artificial intelligence (AI) simulate humanthinking. This technologyincludes machine learning, natural language processing,speech recognition, andcomputer vision.
VisualisationVisualisation refers to theinnovative use of images andinteractive technologyto explore large, high-densitydata sets.
BlockchainBlockchain is a digital distributedledger, where transactions areverified and securely stored on anetwork of distributed andconnected nodes, without agoverning central authority.
Core modernisation
Exponentials
Digital tools designedto deliver new anddifferent capabilitiesto finance
Natural Language Processing NLP refers to systems where users can communicate either orally or through written dialogue using spoken natural language leveraging artificial intelligence and computational linguistics
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 7
A new class of digital technologies is reshaping the finance function
Technology enabler – Robotic Process Automation (RPA)
Opening email and attachments
Logging into web/ enterprise applications
Moving files and folders
Copying and pasting
Filling in forms
Reading and writing to databases
Scraping data from the web
Making calculations
Connecting to system APIs
Extracting structured data from documents
Collecting social media statistics
Following “if/then” decisions/rules
What RPA can do
Robotic Process Automation (RPA) in its basic form is the automation of manual processes by replicating repetitive tasks with a computer-based application.
• programmed to perform repeatable tasks
• operates effectively in the User Interface layer
• replicates human interactions with proven technology
Flexibility
• Enables focus on value-add activities
• RPA can integrate with most applications in use
Efficiency & Quality
• Accurate processing & reduced errors
• Improved transparency and data quality
Governance & Compliance
• 15 – 50% cost reduction opportunity
• Improved productivity• Can work 24/7
Cost Reduction
• Embedded controls• Run pre-defined processes with
complete audit trail
Benefits
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 8
Analytics and visualisation supports decision making by redesigning reporting workflow and dashboard using the latest analytics technologies
Technology enabler – Analytics and visualisation
Standardise management reports and analysis as much as
possible
Only prepare reports and analysis that are useful with clear
purpose
Use graphs / charts to present relationships between data
Standardised
Purpose driven
Timely & reliable
Data visualisation
Report close to real-time / frequently
with no material error
Insightful & predicative
Linking financial & operational data
Segmenting & benchmarking
Automated
Draw insight from data for better forecast & future
opportunities
Connect financial and operational data together for
business review
Automate reports to the extent possible with
dashboard functions
Allow data to be segmented and benchmarked for in-
depth analysis
Leading practices to consider
Country: Hong Kong Type: Premium Facility A Period: Jun-16 Analysis: YTD
0% 20% 40% 60% 80% 100%
Revenue - Actual vs. Budget
Actual Budget
Gross Area Rented (Sq. M)
118 (PY:95)
Net Promoter Score (NPS)
42 (PY:37)
Tenants by Industry
Accounting
Banking / Trading
Beauty & Care
Interior Design
Software Development
0
50
0%
50%
100%
A B C D E
Capital Cost Effectiveness (By Facility)
Revenue / Sq. M Capital Costs / Sq. M NPS
0%
5%
10%
15%
20%
25%
30%
35%
74%
76%
78%
80%
82%
84%
86%
88%
90%
A B C D E
Market Expense Effectiveness(By Facility)
Occupancy Rate Marketing Expenses to Revenue
0
50
100
0%
50%
100%
A B C D E
Customer Satisfaction vs. Operational Costs(By Facility)
Customer Satisfaction Operational & Cleaning Costs
0%
20%
40%
60%
80%
100%
120%
0
20
40
60
80
100
1 2 3 4 5
Maintenance Cost Effectiveness (By Facility)
Ad-hoc Maintenance
Planned Maintenance
Maintenance Costs to Revenue per Sq M.
0%
10%
20%
0%
50%
100%
A B C D E
Net Margin Analysis (By Facility)
Salaries & wages Marketing Operational & cleaning
Maintenance Administrative Net Margin
Type: Trade Show Industry: Health Science Event Name: A Period: Jun-16 Analysis: YTD
0% 20% 40% 60% 80% 100%
Revenue - Actual vs. Budget
Actual Budget
No. of R. Exhibitors
95 (PY:88)
No. of R, V is itors
1.2K (PY:1.1K)
Visitors by Country
US
UK
HK
China
India
Japan
Korea
Malaysia
Thailand
0
20
40
60
80
FY11 FY12 FY13 FY14 FY15 FY16
Revene Growth (By Events)
A B C D E
0
200
400
600
800
1000
A B C D E
Revenue per Net Space (By Events)
0
100
200
300
0
20
40
60
80
A B C D E
Venue Expenses Effectiveness (By Events)
Venue Expenses per Booth Booth Numbers
76
100
Space Sales (To Date)
Space Sold
Space Remained
0
100
200
300
400
500
600
700
800
900
0%
20%
40%
60%
80%
100%
120%
A B C D E
Marketing Effectiveness
(By Events)
Marketing expenses Revenue Revenue per net space
0
2
4
6
0%
50%
100%
A B C D E
OMS Revenue Analysis (By Events)
Other Market ing Services Event Revenue OMS Revenue / Client
Net P romoter Score
38 (PY:36)
0
10
20
30
40
50
0%
20%
40%
60%
80%
100%
A B C D E
NPS Analysis (By Events)
Revenue / Sq. M Venue Operating Costs / Sq. M NPS
0%
100%
A B C D E
Procuremtn Saving Opportunity Analysis (By Events, per Exhibitor)
Revenue Venue Rental Booth Construction
Marketing Expenses Venue Operating On-site Support
Event Business Facility Management Social Media
• Repeated exhibitors / visitors• Revenue growth• NPS analysis• OMS ratio• Venue expense ratio
• Occupancy rate• Customer satisfaction analysis• Maintenance costs ratio• Marketing costs effectiveness• Capital cost ratio
• Internet traffic• Browsing application ratio• Impression rating by:
• Advertisers• Devices• Country
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 9
Moving from historical to predictive analysis
Technology enabler – Analytics and visualisation
Advanced analytics
Reporting and data
exploration
Predictive forecasting
Descriptive analytics
External reporting
Management reporting
Operational reportingHindsight
(Descriptive)
Foresight(Predictive)
Insight(Diagnostic)
Amplified intelligence and automation(Prescriptive)
Cognitive
Decision support
High
Low
Cap
abili
tie
s
Foundational elements
Delivery model DataTechnologyTalent GovernanceData literacy
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 10
Getting started
Join an immersive experience (e.g., Digital Finance Lab) to explore the “art of the possible” and determine a future state
vision, goals, and benefits
Immerse Yourself in Innovation
Use an agile, iterative piloting approach to move from strategy to prototyping as quickly as possible –“fail fast” and achieve rapid results
Prove it Works (Quickly)
Evolve your finance organisation by collaborating with other business
functions and vendors
Build Your Ecosystem
THINK BIG
Disconnect from the core business and set up a digital leadership team to
assess disruptive opportunities within the organization
Scaling the Edges
START SMALL ACT FAST
ESTABLISH A DIGITAL LEADERSHIP TEAM
Identify a visionary program leader and assemble a team to accelerate your digital goals. Determine a governance model and policies that might need to be adapted to execute successful change management and ensure the solution is absorbed into the business.
Prioritise your desired tactics and pick just one or two to get started in order
to establish proof of concept
Pick One or Two Plays
Seek opportunities to share digital experiences with other functions –
knowledge share
Market Your Own Success
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 11
ERP Implementation Complete
LoB #1 ERPImplement
Pilot Wave 1 NLG Reports
Waved FP&A Reporting CoE
Digital Finance Acceleration Office
Launch BA Analytics CoE
Enable Bot Factory
LoB #1 ERPDesign & Build
Strategy, Roadmap & Case for Change
Design Business Analytics CoE
Digital Maturity Assessment
Blockchain Proof of Concept
Waved ERPImplementation
Pilot Wave 1 Bots
Q3
2017
Q3
2017
Q3
2018
Q1
2018
Q4
2017
Q2
2022
2015
Q1
20172016
Q2
2017
Q2
2018
Q4
2018
Q4
2018
Q2
2019
Central FinanceWaved Waved Implementation
Undertook an accelerated approach to capture value from emerging and disruptive technologies and disciplined execution of an innovation lifecycle across various use cases and applications of technology to reach the desired transformed potential of the finance organisation
Impetus for change
Significant time spent chasing, manipulating, and massaging data / reports
High cost of ownership due to varying system functionalities and legacy systems
Overlapping, duplicative, and redundant responsibilities, activities, and reports
Talent programs did not reflect a tangible digital talent model
Questions addressed
What is the right time to deploy a finance transformation?
What should be our priorities / focus areas as we begin this journey?
Are there benefits to infusing digital tools into the existing infrastructure?
What is the best approach to implementing a new core financial system?
How can advance analytics be used to enhanced decision making and allow for insight-driven collaboration?
What can we do to build digitally and analytically inclined talent / skill-sets?
Sample outcomes
20 Natural Language Generation reports
144 “bots” deployed across all delivery channels
50k+ hours of manual activities automated
90 Days to establish RPA Center of Excellence
$100B Global 100 Company: Successful accelerated transformational journey
Situation
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 12
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities(collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and re lated entities are legallyseparate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm andrelated entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please seewww.deloitte.com/about to learn more.
Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and theirrelated entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region,including Auckland, Bangkok, Beijing, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney,Taipei and Tokyo.
About Deloitte MalaysiaIn Malaysia, services are provided by Deloitte Tax Services Sdn Bhd and its affiliates.
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firmsor their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Beforemaking any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.
No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in thiscommunication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damagewhatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and theirrelated entities, are legally separate and independent entities.
Farrukh Khan l 25 November 2020
Deloitte TaxMax - The 46th seriesTransforming finance and digitising businesses
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 2
CFO role
Digital controllership
• Harness technological capabilities
• Improve on the traditional focus on proficient accounting, reporting and effectiveregulatory compliance
• Provide insightful and strategic partnership from finance to business
Digital tools designed to deliver new and different capabilities to finance
Core modernisation
Process robotics Visualisation Natural Language Processing
Exponentials
Advance analytics Cognitive computing Blockchain
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 3
Current state of play: Hybrid digital / analog operation
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 4
Solution: Virtual finance operation
Rethinking finance operations from the ground via 4 steps to empower teams to work from anywhere, collaborate in real-time, and
minimise tedious, manual processes while increasing quality and timeliness.
1) Go paperless
• Encourage suppliers to issue electronic invoices
• Establish central portal for uploading and matching
• Utilise e-payments to perform transactions
3) Go automation• Embrace Optical Character Recognition (OCR) and
Natural Language Processing (NLP) technology to
automate the data capture of physical documents
• Leverage Robotics Process Automation (RPA) technology
to automate repetitive, rule-based accounting activities
2) Go mobile• Replace desktops with laptops
• Enable invoices, receipts and expense claims to be
captured electronically and processed on-the-go via
mobile devices with expense management apps,
embedding approval workflows integrated with theERP
4) Go cloud
• Move to cloud-based ERP systems
• Implement a cloud-based financial close platform
• Utilise cloud-based analytics and reporting
solutions
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 5
Accounting and finance process
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 6
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 7
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 8
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 9
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 10
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 11
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 12
Case 6: After Connected Reporting Process
Automated Reporting Process
Report Preparation & Real - Time Update
Source Data
Source System Connections, Integration, Additional Mapping/Grouping
Data Assembly & Consolidation Time
ERP Consolidation, Reconciliation, Planning
Other Structured Systems• HR• CRM• Data Warehouses• Marketing, Procurement
Unstructured Data• Divisional Entities• EHS• Narratives• Tax Provisioning• Capital Lease
Spreadsheets
Stress Testing/Capital Planning
Global Statutory Reporting
Management & Performance Reports
Investor Relations
Financial Reporting
Structured Systems
PLAN RECORDCLOSE &
CONSOLIDATEANALYZE REPORTExample of automated report
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 13
Our Partners
BLACKLINE - Terry Smagh
CONCUR - Chua Li Li
- Eric Saito
Deloitte TaxMax – The 46th series© 2020 Deloitte PLT 14
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities(collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and re lated entities are legallyseparate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm andrelated entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please seewww.deloitte.com/about to learn more.
Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and theirrelated entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region,including Auckland, Bangkok, Beijing, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney,Taipei and Tokyo.
About Deloitte MalaysiaIn Malaysia, services are provided by Deloitte PLT (LLP0010145-LCA) (AF0080), a limited liability partnership established under Malaysian law, andits affiliates
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firmsor their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Beforemaking any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.
No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in thiscommunication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damagewhatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and theirrelated entities, are legally separate and independent entities.
Thin Siew Chi l 25 November 2020
Deloitte TaxMax - The 46th seriesConsidering tax as part of your digital journey
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 3
Tax administrations are digitising across the globe
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 4
What should tax functions be considering during their digital journey?
Common challenges faced by
tax function in practice today
• High number of manual
processes (e.g. extract from
data sources to populate an
excel sheet, etc.)
• Pressure to reduce costs while
improving efficiencies
• External pressure from tax
administrations
Drivers to drive tax digital
transformation
• Reduce manual processing time
with data
• To create a more flexible and
strategic workforce
• Enhance efficiencies, providing
more streamlined access to the
data across the organisation
Unlocking benefits in adopting tax digital transformation
• Enhance better decision
making by leveraging on real
time tax data for scenario
planning, effective tax rate
analysis, etc.
• Reduce human error
• Unlock time and manage tax
risks particularly in responding
to tax administrations
Today’s pressures and challenges for tax departments are increasingly evolving, resulting in the need for new
operating models that add more value, while maintaining quality and transparency, and reducing costs.
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 5
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities(collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and re lated entities are legallyseparate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm andrelated entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please seewww.deloitte.com/about to learn more.
Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and theirrelated entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region,including Auckland, Bangkok, Beijing, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney,Taipei and Tokyo.
About Deloitte MalaysiaIn Malaysia, services are provided by Deloitte Tax Services Sdn Bhd and its affiliates.
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firmsor their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Beforemaking any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.
No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in thiscommunication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damagewhatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and theirrelated entities, are legally separate and independent entities.
Yap Kong Meng l 25 November 2020
Deloitte TaxMax - The 46th series
Defensive M&A
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 2
Yap Kong Meng, Executive Director, Deloitte corporate finance
Introduction
Lead Financial Adviser
Advised shareholders of Jaya Grocer on an investment from AIGF
Malaysia
Lead Financial AdviserAdvised Fraser & Neave Holdings
Berhad on its divestiture of Malaya Glass Products Sdn Bhd to BJC and OI
for USD 345 million
Malaysia & Singapore
Lead Financial Adviser
Advised shareholders on the sale of 100% equity stake of TCRS Restaurants Sdn Bhd
Malaysia
Lead Financial Adviser
Advised on the divestment of a QSR beverage company
Malaysia
Lead Financial Adviser
Buy-side exclusive advisor to consortium of investors from Saudi on acquisition of
franchising rights of McDonald’s operations
Singapore & Malaysia
Lead Financial AdviserBuy-side adviser to Red Sea Housing
Services Co Ltd on the acquisition of a 90% stake in AM Modular
Malaysia
Lead Financial Adviser Advised Cycas, a unit of PE firm Creador and GHL executive vice chairman on the divestment of their equity stake in GHL
Systems Bhd
Malaysia
M&A deal of the year
Lead Financial AdviserBuy-side adviser to Sanlam Ltd on the
acquisition of a 51% stake in MCIS Zurich Insurance Bhd for USD 119 million
Malaysia
Lead Financial Adviser Acted as buy side advisor to Zurich
Insurance Group on the acquisition of 80% in Adira Insurance and related long term
distribution agreements
Indonesia
Lead Financial AdviserDeloitte supported OMV AG in the
acquisition of 50% of Sapura Upstream with Corporate Finance and Due Diligence
services
Austria & Malaysia
Lead Financial Adviser Sell-side advisor to Pacific & Orient Insurance on its 49% sale to Sanlam
Insurance (South Africa)
Malaysia
M&A deal of the year
Lead Financial Adviser Advised Millennium Arena Sdn Bhd on
sale of 100% equity stake in Upeca Technologies Sdn Bhd to Senior plc
Malaysia
Sell-side Buy-side
May 2018
Lead Financial Advisor Advised shareholders on the sale of 100%
equity stake of Klang Hock Plastic Industries Sdn Bhd
Malaysia
Lead Financial Adviser
Acquisition of 100% equity stake in Advend Systems Pte Ltd by Etika Holdings
Sdn Bhd
Southeast Asia
Lead Financial AdviserAdvised UEM Edgenta on acquisition of
UEMS Pte Ltd through a competitive process
Malaysia
September 2019
Financial Adviser
Investment in Series F of GoJek, a Southeast Asian unicorn
Asia Pacific
Overview of Deloitte’s Corporate Finance Advisory in Malaysia & Southeast Asia
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 3
India China United States United Kingdom Germany Japan Korea
Non-discretionary items
Household goods 49% 51% 20% 15% 13% 2% 15%
Groceries 55% 36% 32% 22% 21% 6% 25%
Utilities 41% 41% 20% 12% 5% -4% 7%
Medicines 44% 23% 11% 6% 1% 3% -3%
Internet/ mobile 52% 36% 15% 7% 7% 0% 11%
Healthcare 50% 39% 10% -3% 0% 3% -3%
Housing 24% 18% 9% 1% 1% -8% -2%
Discretionary items
Alcohol -2% 3% 1% 2% -11% -14% -23%
Apparel/ footwear 10% 25% -11% -12% -10% -21% -16%
Books 26% 33% -5% -5% -10% -9% -13%
Cable TV 34% 29% 12% 4% -7% -12% -1%
Electronics 15% 22% -9% -18% -21% -14% -27%
Entertainment 36% 28% 1% -4% -8% -12% -5%
Furnishings -1% 5% -15% -22% -30% -26% -42%
Restaurant/ takeout -6% 18% 0% -15% -6% -15% -9%
Travel -12% -5% -27% -25% -31% -35% -45%
Vehicle fuel/ oil 19% 23% -10% -17% -7% -15% -13%
Source: Deloitte State of the Consumer Tracker in the era of Covid-19 based on survey dated 11 July 2020. Under Consumers net spending intentions by country, figures under Less-discretionary products and More-discretionary products represent the percentage of respondents who selected “somewhat/a lot more” minus the percentage of respondents who selected “somewhat/a lot less” to the question, “How much do you plan to spend on each of the following items over the next four weeks compared to the last four weeks?”
Consumers net spending intentions by country(How to consumer plan to spend over next four weeks, compared to the previous four)
Current situation
How different economic sectors are weathering the pandemic storm
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 4
Current situation
M&A market is still have many potential buyers with dry powder
Global M&A deal volume has declined by 25% in 9M 2020 vs 9M 2019
Malaysia’s M&A deal volume has declined by 21% in the same period
M&A activities will have strong influence in shaping the “next normal” conditions. The S&P 1200 companies have a record USD3.8 trillion in cash reserves and the ability to service debt in a dovish monetary environment and the private equity sector has USD2.5 trillion worth of dry powder ready to be deployed on opportunities.
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 5
M&A strategy framework
M&A is a great tool to accelerate achievement of corporation objectives
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 6
Identify ways to raise capital
Improve operational efficiency or
increase business flexibility
• Divest non-core or distressed assets
• Wind down underperforming businesses
• Identify rapid turnaround situations to optimize portfolio
• Explore JVs and alliances with suppliers and partners
Defensive M&A
Salvage value
Potential responses M&A deal archetypes
During times of crisis and recovery, divestments tend to create greater shareholder returns for both buyers and sellers. One of the main reasons for out performance during uncertain conditions is because shareholders are looking to concentrating on their core businesses while buyers are investing strategically to deliver well defined growth plan
Companies with capital constraints should explore alliances and seek alternative forms of capital such as private equity and other pools of private to pursue new opportunities
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 7
Adjust operating models in
response to competitive dynamics
Prepare the business for the “new
world order”
• Pursue deep synergies from recent acquisitions
• Develop partnerships for non-core capabilities
• Pursue co-investment opportunities for capital intensive projects
• Pursue opportunistic deals to safeguard core markets
Defensive M&A
Safeguard markets to maintain competitive parity
Potential responses M&A deal archetypes
For companies that has recently completed acquisition, accelerating business integration will be able to help free up valuable working capital to weather crisis.
Companies with capital constraints should explore alliances and seek alternative forms of capital such as private equity and other pools of private to pursue new opportunities
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 8
Rebalance your portfolio
Capture additional revenue in
adjacencies
Define “new world order” through
power of networks
Invest at scale at the “edge”
• Pursue acquisitions to facilitate vertical integration
• Close gaps in portfolio through strategic acquisitions
• Acquire distressed underperforming peers and early stage companies
• Acquire capabilities to accelerate digital transformation
• Orchestrate a web of multilateral partnerships and alliances
• Capture new opportunities resulting from sector convergence
• Acquire high growth businesses from the innovation ecosystem
• Curate a portfolio of investments on the “edge” of your core business
Offensive M&A
Salvage value
Potential responses M&A deal archetypes
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 9
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities(collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legallyseparate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm andrelated entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please seewww.deloitte.com/about to learn more.
Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and theirrelated entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region,including Auckland, Bangkok, Beijing, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney,Taipei and Tokyo.
About Deloitte MalaysiaIn Malaysia, services are provided by Deloitte Tax Services Sdn Bhd and its affiliates.
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firmsor their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Beforemaking any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.
No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in thiscommunication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damagewhatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and theirrelated entities, are legally separate and independent entities.
Khoo Siew Kiat l 25 November 2020
Deloitte TaxMax - The 46th seriesLeveraging on Corporate Rescue Mechanisms (CRM) to reconstruct liabilities
Deloitte TaxMax – The 46th series© 2020 Deloitte Corporate Solutions Sdn Bhd 2
“The Pecking Order”
Members / Shareholders
Unsecured creditors
Secured creditors
Preferential payments(applicable to liquidation under Section 527 of the Companies Act 2016) &
Essential payments
Distribution of assets
Under an insolvency scenario
Deloitte TaxMax – The 46th series© 2020 Deloitte Corporate Solutions Sdn Bhd 3
Financial restructuring & insolvency decision tree
Business review
Corporate rescue mechanisms1. JM / CVA / SOA2. CDRC / other forms of debt
restructuring or turnaround management
Company in financial difficulties?
YES
YES
Can the company be turned around / re-organized outside formal insolvency proceedings?
NO
Is there security?
1. Court receivership2. Voluntary liquidation3. Court liquidation4. Attachment – garnishee / charging order
Is there a surplus funds / assets?
YES NO
YES NO
Financial restructuring / Corporate Rescue Mechanism
Insolvency proceedings
1. Debenture Receivership2. Court Receivership3. Foreclosure
Hand back to the company Court liquidation
Deloitte TaxMax – The 46th series© 2020 Deloitte Corporate Solutions Sdn Bhd 4
Corporate Rescue Mechanisms (CRM)
Deloitte TaxMax – The 46th series© 2020 Deloitte Corporate Solutions Sdn Bhd 5
Broadly divided into two types
Overview of CRM
Formal process1 Informal process
• Judicial Management (JM)
• Corporate Voluntary Arrangement (CVA)
• Scheme of Arrangement (SOA)
• Corporate Debt Restructuring Committee (CDRC)
• Other forms of voluntary arrangement with some or all of the creditors
Note 1: Relates to rescue mechanisms which involve the Court.
Key note: The objective of CRM is to reconstruct / reorganise liabilities
of a company under distress so that the said company can continue to
operate as a going concern. However, the use of each type of CRM will
depend on the underlying situation / circumstances in which the
company is facing
Deloitte TaxMax – The 46th series© 2020 Deloitte Corporate Solutions Sdn Bhd 6
CRM at a glance
Directors lose control / powers to manage
company ? Moratorium Duration Extension
Restructuring approval condition
JM Yes
(Note 1) Yes (automatic) 6 months
Up to further 6 months
(Note 2)75% in value of creditors
CVA No Yes (automatic) 28 days Up to further 32 days
(Note 2)75% in value of creditors
SOA NoYes (has to be applied /
subject to Court approval)3 months
Up to further 9 months
(Note 2) 75% in value of creditors
CDRC NoYes (standstill limited to
bank creditors only) Note 3 Note 3
Depending on agreement with bank creditors
Other forms No No Note 4 Note 4 Note 4
Note 1: The judicial manager may continue to work with the senior management of the company.
Note 2: Subject to existing conditions stipulated under the Companies Act 2016 and further conditions imposed by Court.
Note 3: Duration and extension subject to CDRC’s discretion i.e. as long as the file remains with CDRC.
Note 4: Subject to agreement with respective creditors.
Deloitte TaxMax – The 46th series© 2020 Deloitte Corporate Solutions Sdn Bhd 7
Different stakeholders in a distressed scenario will have various corporate rescue options available to them
Who can initiate CRM?
Shareholders Directors Unsecured creditors Secured creditors
JM
CVA
SOA
CDRC
Other forms
(situational)
Deloitte TaxMax – The 46th series© 2020 Deloitte Corporate Solutions Sdn Bhd 8
Key factors for a successful CRM
3. “Business case” for restructuringCome up with a viable proposal which demonstrates that the business has the prospect of operating as a going concern after restructuring / workout scheme.
4. Work with credible consultantsEngage consultants who have the relevant expertise, experience, track record and good relationship / network with the workout teams from banks / financial institutions.
1. CommunicationEngage in early communication
and discussions with creditors and stakeholders to manage their
expectations and get their buy-ins prior to embarking on a
restructuring exercise.
2. TransparencyBe transparent about the position of
the company when formulating a restructuring proposal, including
your consultants, to ascertain options available and execute the
best course of action.
Deloitte TaxMax – The 46th series© 2020 Deloitte Corporate Solutions Sdn Bhd 9
Deloitte Malaysia – Restructuring Services Please contact us
Khoo Siew KiatExecutive Director+603 7610 [email protected]
Deloitte Corporate Solutions Sdn BhdLevel 16, Menara LGB 1 Jalan Wan KadirTaman Tun Dr. Ismail60000 Kuala LumpurMalaysiaTel : +603 7610 8888Fax : +603 7725 9442Website : www.deloitte.com/my
Kevin Lee Director+603 7610 8819 [email protected]
Hong Chee HinDirector +603 7610 8802 [email protected]
Thrive
Recover
Respond
2.
3.
1.
Eddie GohAssociate Director +603 7610 8202 [email protected]
Deloitte TaxMax – The 46th series© 2020 Deloitte Corporate Solutions Sdn Bhd 10
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities(collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legallyseparate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm andrelated entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please seewww.deloitte.com/about to learn more.
Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and theirrelated entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region,including Auckland, Bangkok, Beijing, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney,Taipei and Tokyo.
About Deloitte MalaysiaIn Malaysia, services are provided by Deloitte Corporate Solutions Sdn Bhd and its affiliates.
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firmsor their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Beforemaking any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.
No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in thiscommunication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damagewhatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and theirrelated entities, are legally separate and independent entities.
Toh Hong Peir l 25 November 2020
Deloitte TaxMax - The 46th seriesRestructuring of business during a pandemic
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 2
Restructuring of business during a pandemic
• Debt restructuring
• Deferment of loan repayment
• Refinancing
• Bad debts / waiver of loan
Financial restructuring
• Merging of business
• Flattening the group structure
• Sale of non-core assets
• New investor / White knight rescue
• Right sizing of employees
Operational restructuring
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 3
Debt restructuring
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 4
Tax considerations in debt restructuring
• Tax deduction allowed when the interest is due to be paid - Section 33(4) of the Income Tax Act 1967.
Deferral of loan interest payment
• Interest expense – takes on the same character as the original borrowing.
Refinancing
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 5
Tax considerations in debt restructuring
• Deductible under Section 34(2) of the Income Tax Act, 1967 - trade debt reasonably estimated to be irrecoverable either wholly or partially.
• Public Ruling 4/2019 – Issuing reminder notices, having a debt restructuring scheme, or entering into a debt settlement based on sound commercial considerations, legal action taken, etc.
Bad debt written off
• Section 30(4) of the Income Tax Act, 1967 - gross business income on amount of debt released if a tax deduction has been taken or any capital allowance has been claimed in respect of the original expense.
Waiver of debts/ loans
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 6
Tax considerations in debt restructuring
• Debt restructuring cost such as professional fee, loan agreement and etc.
Cost incurred in relation to debt restructuring
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 7
Operational restructuring
1. Reorganisation of holding structure
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 8
Reorganisation of holding structure
Income tax
• Sub A (Transferor) - Any gain from the transfer of shares held for long term investment purposes should be capital in nature
• HoldCo (Transferee)- Cost of acquisition not tax deductible.
Real property gains tax (RPGT)
• Sub A (Transferor) - If Sub B is a RPC, any gain from the share transfer is subject to RPGT at the rate of 10% to 30%
• No gain no loss – Sch 2, Para 17(1)(a),(b), (c)
• Would HoldCo (Transferee) be a RPC as a result of acquiring Sub B?
• Reorganisation is undertaken to make it easier for profitable subsidiaries to repatriate profits to holding company, and for holding company to inject cash into loss making subsidiaries
• The final outcome is a flat group structure
Overview of tax considerations
HoldCo
Sub A
Before After
Sub B
HoldCo
Sub A Sub B
Transfer of shares of Sub B
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 9
Reorganisation of holding structure
Stamp duty
• Transfer of shares in a non-listed company attracts ad-valorem stamp duty at 0.3% of value of shares
• Value of shares = Higher of net tangible assets or transfer consideration
• Availability of stamp duty relief
• Section 15A relief may be available, provided that the following conditions are fully met:-
a) HoldCo is a company incorporated in Malaysia;
b) Sub A and HoldCo continue to be at least 90% associated in terms of shareholdings for at least 3 years;
c) Sub B is not disposed of by HoldCo within 3 years;
d) The transfer brings about greater efficiency in operation.
• Reorganisation is undertaken to make it easier for profitable subsidiaries to repatriate profits to holding company, and for holding company to inject cash into loss making subsidiaries
• The final outcome is a flat group structure
HoldCo
Sub A
Before After
Sub B
HoldCo
Sub A Sub B
Transfer of shares of Sub B
Overview of tax considerations (cont’d)
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 10
Operational restructuring
2. Merger of businesses
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 11
Merger of businesses
Income tax
• Controlled transfer provisions
• Transfer of stock – Section 35(5) of ITA 1967
• Transfer of trade receivables – debts acquired and subsequently written off is not deductible
Real property gains tax (RPGT)
• Sub A (Transferor) – RPGT payable on transfer of real properties
• Sub B (Transferee) - To retain the entire amount of money consideration or 3% of total consideration, whichever is lower
• No gain no loss – Sch 2, Para 17(1)(a),(b), (c) • Merger of businesses may mitigate overall operational costs
by cutting redundant operations and improving overall efficiency
Overview of tax considerations
HoldCo
Sub A
Before After
Sub B
Transfer of business
HoldCo
Sub A Sub B
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 12
Merger of businesses
Stamp duty implications
• Transfer of certain assets, e.g. real property, receivables, goodwill attracts ad-valorem stamp duty of 1-4%
• Availability of stamp duty relief
• Stamp duty exemption for M & A carried out by SMEs (introduced under PENJANA) - 1 July 2020 to 30 June 2021
• Section 15 relief may be available, provided that all the following conditions are fully met:-
a) Sub B is a company incorporated in Malaysia;
b) The transfer of business (i.e. undertaking) is made in connection with a scheme of reconstruction or amalgamation;
c) The consideration is at least 90% in shares issued by Sub B to Sub A / HoldCo;
d) Sub A / HoldCo retains the beneficial ownership in the consideration shares (issued by Sub B) for at least 3 years.
• Merger of businesses may mitigate overall operational costs by cutting redundant operations and improving overall efficiency
Overview of tax considerations (cont’d)
HoldCo
Sub A
Before After
Sub B
Transfer of business
HoldCo
Sub A Sub B
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 13
Operational restructuring3. Sale of non-core or non-performing businesses
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 14
Outright sale
• Outright sale of non-core business to a third party buyer to generate cash flow
• The cash flow generated from the sale may then be injected into the core business carried on by the group
• The sale may be in the form of sale of shares of the subsidiary or sale of business by that subsidiary
Overview of tax considerations
HoldCo
(Seller)
Sub A
(Core)
Sub B
(Non-core)
Sale of shares Sale of business
Income tax(Seller)
(Buyer)
No income tax exposure if the shares were held for long term investment
Unabsorbed losses / capital allowances (CA) are preserved as long as Sub B is not dormant
Income tax issues depending on the assets sold (FA, debtors, stocks, etc.)
Unabsorbed losses / CA will not be transferred over
RPGT(Seller)
No RPGT implication unless Sub B is a RPC
RPGT on sale of real properties
Stamp duty(Buyer)
0.3% at 1-4%
Buyer
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 15
Operational restructuring4. New investor / White knight rescue
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 16
New investor / White knight rescue
• New investor may acquire a percentage of the shares owned by HoldCo
Overview of tax considerationsAcquisition of existing shares in Intermediate Co
Injection of capital by new investor in return for new shares issued by Intermediate Co
Income tax(Seller)
No income tax exposure if the shares were held for long term investment
No tax implications
RPGT(Seller)
No RPGT implication unless Intermediate Co is a real property company (RPC).
No tax implications at the point of issuance
If Intermediate Co is a RPC – RPGT payable by investor at the point of exit
Stamp duty(Buyer)
Stamp duty of 0.3%. N/A
Intermediate
Co
Sub A Sub B
HoldCo
(Seller)
New
investor
(Buyer)
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 17
Operational restructuring5. Right sizing of manpower
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 18
Right sizing of manpower
Overview of tax considerations
Employer
- Deductibility of severance payments
- Due to cessation of business or to enhance operational efficiency?
Employee
- Taxability of compensation for loss of employment
- Section 13(1)(e) / Paragraph 15(1), Schedule 6 of ITA 1967
Deloitte TaxMax – The 46th series© 2020 Deloitte Tax Services Sdn Bhd 19
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities(collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legallyseparate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm andrelated entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please seewww.deloitte.com/about to learn more.
Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and theirrelated entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region,including Auckland, Bangkok, Beijing, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney,Taipei and Tokyo.
About Deloitte MalaysiaIn Malaysia, services are provided by Deloitte Tax Services Sdn Bhd and its affiliates.
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firmsor their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Beforemaking any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.
No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in thiscommunication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damagewhatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and theirrelated entities, are legally separate and independent entities.