Former Grant Thornton partner Tarun Mistry talks to Brian Cantwell about setting up a new advisory business, the leasing market, how it could change in the next 12 months, and what the market could do to become more efficient.
The leasing and automotive finance markets have been filled with M&A equity transactions over the past few years, a large number of which Tarun Mistry advised on as lead of Grant Thornton’s (GT) specially developed sector-focused consulting unit.
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As a result, he has had a unique insight into how the market has changed and developed in its structure, and what it takes to set up a new market entrant.
Tarun left GT in 2018 and set up his own consultancy shortly thereafter. T Mistry & Associates (TMA) focuses on the financing and lending sector, including the consumer and business lending, regulated and unregulated, secured and unsecured, prime, near-prime and subprime markets. Since the firm launched, it has advised clients in the UK and continental Europe on more than £100m of M&A transactions, over £250m of debt transactions and facilitated around $100m (£78.9m) of trade finance.
Motor Finance caught up with Mistry to find out how he sees the leasing and motor finance markets changing, and how this might affect his own business.
Motor Finance: How have you seen the leasing and financing market develop over the past year?
Tarun Mistry: I anticipated that there would be a slowdown in M&A activity over the next three or four years whilst at GT. There’s so much uncertainty in the market at the moment – partly because of Brexit and partly due to regulatory changes. Vendor valuation expectations have also remained high after recent transactions; it’s therefore not surprising that M&A activity in the sector has slowed somewhat.
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By GlobalDataI suspect that some of the private equity M&A investments into the sector are getting close to requiring achieving an exit to meet their funds’ time horizons. Post-Brexit, you could see these companies coming to market. We may also see some consolidation play in the challenger bank market to achieve cost synergies, principally around regulatory compliance and more effective use of capital.
I anticipate that the majority of my work will focus on debt transactions. This remains an attractive advisory space, not only in the equipment leasing market, but also in the regulated consumer finance and motor finance markets. What I am doing is helping businesses raise debt finance, or helping banks and debt fund providers in their diligence of their prospective clients.
In the last year or so, I’ve also facilitated almost £100m of trade finance transactions. I think this is a reflection of technology opening this funding market for corporates to tap into liquidity, and similarly for funders to offer this finance product in an efficient manner.
MF: Is there still a strong demand for advice on setting up new leasing businesses? And is the pipeline for market entry as strong as it has been?
TM: The industry would benefit from knowing how to use advisers in their business. I think that’s a reflection of the lack of focused advisors in our market, and therefore businesses have completed projects in-house. With all advisers, there’s a need to educate the industry on how we can assist their businesses.
There are financing opportunities out there, and finding the right opportunities where you can offer a value-based financial services proposition utilising the appropriate technology in a regulatory-compliant manner is the key.
MF: What are your top objectives for the new business?
TM: Up to the point I left GT, and now with TMA, my approach remains that of an industry-first, service-line-second strategy.
In most advisory firms you generally have service line experts – for example, M&A, due diligence, tax and so on – with secondary focus on industry sectors, whereas my proposition is focused on understanding, and leveraging this knowledge of the leasing, consumer and motor finance sectors, followed by bringing in the relevant advisory services, thereby making the offering industry focused and bespoke – and therefore differentiated.
Retaining this differentiated approach in a growing service line-focused scaled advisory practice can have its challenges.
For me, the objectives on leaving GT were to remain plural; that is, I wanted to be involved in many businesses, to remain in the same industry, and thirdly to manage my work-life balance and enjoy what I do.
I knew I wanted to stay in advisory, but I didn’t know whether I was going to spend most of my time doing that or other things, like my non-executive positions, or getting involved more directly with businesses and management teams.
Over the last year or so, what’s clear is that the advisory business is going to take up the majority of my efforts. It was good to see that, without too much marketing, there is still demand for an industry-focused advisory service. That’s the fundamental part of TMA.
MF: Is there a lot more work for advisers in this market?
TM: There are other industry-focused advisors, but it is a large potential market. There are consumer finance businesses, mortgage sector, motor finance, equipment leasing, large-ticket players, smaller-ticket players, fintech businesses, businesses that are growing rapidly and others that are contracting, and all could benefit from the appropriate advice.
The biggest challenge is coming to market with industry knowledge. That’s the difficult bit: to build a team who know the industry, and being able to leverage that in an advisory perspective. I think that’s where TMA differentiates itself from some of the other advisory firms.
We won a tender recently against a number of larger firms because we understood what the client wanted and we were able to deliver the specialist advisory team required. We weren’t the cheapest, but the client understood that we knew what they wanted and that we were able to deliver against their objectives and add value through the process.
MF: Who are your associates?
TM: In the last year I have worked with eight associates; of those, four are part of the core team and include some ex-GT colleagues.
MF: What’s next?
TM: I’ve taken a non-executive directorship with the Mistral Group, which is a niche finance business focused on the provision of operating and finance leases for buses and coaches. This is interesting work, and allows me to add value to the business without getting operationally involved.
My focus for TMA is to continue to build on what we have achieved in the last 12 months, expand the associate base, do more debt transactional work, and then see where the business goes.
