JP/8/G00

By I. Christianto

JAKARTA (JP): A company applies for business consolidation to avoid bankruptcy, while the another is seeking refuge through mergers and acquisitions. There are also companies suffering from pro forma losses or mired in disputes due to contract breaches. This gloomy scenario may benefit another party: business consulting firms.

In terms of dispute between two companies, as in the case of PT Telkom and PT AriaWest, for instance, it represents how business consultants have played a significant role in either ending the problem sooner or prolonging it.

The lingering dispute between the two companies stemmed from a disagreement over Telkom's plan to buy out AriaWest's stake in a joint operation partnership. The two sides disagreed on the compensation to be paid.

AriaWest corporate communications manager Denni Koswara said in March that AriaWest's assets were valued at US$1.3 billion by the Canadian Imperial Bank of Commerce. The company, however, lowered the figure to $735 million in May.

Meanwhile, based on Telkom's valuation, AriaWest's assets are only worth about $270 million.

In valuing the assets, Telkom hired a business consultant, or more precisely a financial advisor, Salomon Smith Barney, said Dina Arifani of Telkom's investor relations.

She said Telkom did not hire the consultant exclusively for the case, but as a corporate financial advisor.

"We hired Skaddenn and Arps for the financial analysis in terms of litigation support in the AriaWest case," said Dina, adding that for corporate legal affairs, Telkom appointed HPP, which is affiliated to Baker McKenzie.

She said normally the financial advisor worked independently and based on a long-term contract.

"Independently means we can't influence or interfere. But there are always meetings and discussions. The most important thing is trust," she said, adding that every valuation figure si based on accurate data.

So if there is a big difference of asset valuation in the Telkom-AriaWest dispute, both sides must have given different data (on the same project) to their consultants. Nonetheless, whether the business consultant or advisor is for legal, financial or management aspects, the business consulting firm will earn a huge income.

There are usually two types of payments charged by business consulting firms, retainer fee and success fee. Retainer fee is a fixed rate negotiated between the firm and client. The fee will be paid on a regular basis such as weekly or monthly, based on the contract.

Success fee is usually available per case, for instance when the consultant is successful in clinching an acquisition, merger or take over for the client.

Nia Sarinastiti of PT Accenture said normally the fee ranged between $100 and $1,000 based on daily consultation.

"There are many factors that determine the fee, which depends on the complexity and type of contract. Consultation for strategy is so different from consultation for technology implementation," she said.

Bagus Ichwanto of PT Indotrade Pratama Consultant agreed the fee was mostly negotiable depending on the complexity and period of contract.

"We have two types of fee, in Indonesian rupiah and U.S. dollar, as we serve both local and overseas corporations," he said.

He added the fee would also vary according to the consultant, whether she or he is a senior or junior specialist.

Services

The financial crisis in Indonesia has created problems for several big companies in the country, and at the same time, offered opportunities for business consulting firms.

Heru Prasetyo, Accenture's country managing director, said many companies affected by the monetary turmoil sought business consultants for help.

"When the financial crisis first hit Indonesia in 1997, some companies were immediately hampered. But there were also companies that only began to be affected years later but still are until today. They both need help from business consultants," he said.

Accenture, a leading player in the business, offers various services ranging from advisory (such as study and business reports) through advice (on how to implement strategies and reengineer business plans), innovation, financing and outsourcing. It has an equal number of local and foreign clients.

In the meantime, many multinational corporations operating in Indonesia need strategic advice on public affairs and government relations.

Dennis Heffernan of Van Zorge Heffernan and Associate said most clients wanted to consult on strategic planning external relations.

He said such advice was important for most multinational corporations, especially in conditions such as the present in Indonesia. "We also hold regular conferences two or three times every year as well as publish bimonthly reports as part of our consulting services," he said.

Bagus Ichwanto of Indotrade said his company mostly served foreign investors wanting to do business in Indonesia.

"We give them reports of potential businesses to the acquisition process, the legal aspects and general guidance," he said.

He said his company also offered services to domestic companies planning to expand their business overseas.

In addition to consulting firms offering business strategy, organizational structure, financial valuation and government relations, there are many others serving various business-related consultations.

Some companies specialize in certain subjects including advertising, public relations services, media relations, human resources, management consultation, marketing, e-commerce and improving business plans. Others offer information technology planning.

There are also consulting firms offering organizational psychology, management training and customer relations. The other consulting services are in the areas of customer service, product distribution and legal issues.

Some business consultants provide courses, lectures and consultancy services to explore business strategies, technology and the future of work environments. There is also some that provide documentation and systems analysis consulting to manufacturing and service companies.

Other consulting firms help facilitate network implementation and troubleshooting, computer-related resource placement and website development. Meanwhile, financial consulting services help clients improve the management of finances and provide financial analysis for litigation support.

It is interesting to note that some consulting firms offer expertise in advancing the policy objectives of nonprofit organizations, and they can also design advocacy campaigns tailored to meet organizational budgets and resources. But such a service is not popular in Indonesia.

There are several different business structures which businessmen can choose to operate their business smoothly and successfully. Problems, however, are inevitable due to, among others global competition, internal organizational problems, domestic political matters or technology advancement.

Come and ask for advice at business consulting firms if the fee is reasonable and there is still a budget for it.