In January 2023, Charindra Pathiwille, known as CP, was appointed head of financial advisory at Deloitte. He’d effectively spent his entire career with the firm. He was taking over the helm in a challenging M&A market, at a time when Deloitte was changing the way it organises its capabilities and goes to market.

Pathiwille studied accounting and economics at Cardiff University and joined Arthur Andersen in the autumn of 1999 to train as an accountant. Two years into his ACA training, due to the fall-out from Arthur Andersen’s involvement in the Enron scandal in the US, the firm was broken up. Different competitor firms took over the business in different geographies, meaning Pathiwille became a Deloitte employee. He qualified as an ACA in 2003 – and has been there ever since. 

He continued in audit until 2006 and then moved into the firm’s financial advisory business. “I’ve always been surrounded by smart people at Deloitte who have kept me on my toes, but the real reason I’ve stayed so long is that the business has always afforded me the opportunity to build something and that’s been important to me.”

He was made partner in 2013. His experience included complex infrastructure and real estate transactions across the UK and Europe, buy- and sell-side diligence, public-to-private transactions, sale and purchase agreement advice and securitisation projects. With three colleagues, he started to build Deloitte’s first infrastructure fund investors offering in 2006. “Now it’s an end-to-end sector-focused team of 120-plus people in the UK – a £65m-plus business.” He was then tasked with growing the London transactions business.

“I’m a Deloitte lifer,” he says. “I joined the firm because of something I had zero control over, but that was no setback – I’ve been able to build a career at Deloitte over the 20-plus years I’ve been here.”

Refresh reboot

In March this year, the Financial Times reported that Deloitte had “launched the biggest overhaul of its global operations in a decade” and was seeking to “cut costs and reduce the organisation’s complexity in the face of an expected market slowdown”. The report was based on an internal email from Deloitte’s global chief executive Joe Ucuzoglu, in which he said the plan was to reduce the complexity of the organisation to free up time managing staff and focus on more fee-earning client work.

Pathiwille says it was unfortunate that it was reported as a cost-cutting exercise – which, he says, is “just not the case”. He sees the changes as “absolutely necessary” for the firm to modernise: “We’ve been thinking long and hard about how the markets we are in have evolved. We’ve had pretty much the same structure to our organisation for many years. It’s important that we develop our services to best support our clients through these challenging times. The planned reorganisation is not about getting rid of anything – it is all about taking what we have, rearranging it and simplifying it for our clients and the market.”

At present, there are five divisions across Deloitte’s advisory business – these will be cut down to four. According to the email, both audit and assurance and tax and legal will remain as is and there will be two newly created business units: strategy, risk and transactions (SRT) advisory; and technology and transformation. SRT advisory, led by Pathiwille, will bring together the existing financial advisory business and capabilities from consulting and risk advisory, while the latter will bring together digital transformation services, which will include AI, data and cyber.

The aim is to bring greater clarity to how services go to market, better reflecting how clients commission advisory services. It’s probably fair to say that most big firms will currently be looking at how they are structured. “No doubt everyone will do it slightly differently depending on their make-up and where they believe their strengths lie,” says Pathiwille. “It’s a natural progression that probably could have happened some years back. How our clients operate and the challenges they face changed significantly over recent years, so it is important that how we deliver these services evolves in a similar way.” 

It is widely accepted that these are testing times for M&A. Pathiwille says investors, be it private equity or corporates, and vendors are at the “mercy of some macro factors driving the M&A cycle”. But, there are positives for private equity. 

“There is still a large amount of private equity dry powder, coupled with the fact that they haven’t been able to sell assets,” he says. “Both those things tell you that on paper something’s going to happen – the fundamentals are there. 

“But interest rates, the Middle East, Ukraine and elections coming up are all factors that dealmakers will consider.”

Private equity skill

Tilting into new niche sectors or doubling down on markets that are getting hotter has always been a skill of private equity: “There are always opportunities – it is just spotting them,” says Pathiwille. 

But, he adds, value expectations still haven’t been reset. “Despite the increased cost of debt having an impact on returns – and therefore the price of assets – some sellers haven’t changed their price expectations, and that’s a reset that needs to happen.

“When we came out of the pandemic, we thought the world would be fundamentally different, but we had the biggest M&A boom in more than 15 years. The willingness to deploy capital was one of the main drivers in that cycle. As an asset manager you cannot be giving money back.”

Valuation multiples are quite bifurcated between great and less good assets, but it’s not new says Pathiwille: “The valuation landscape has always been complicated – it has never been a one-size-fits-all. The immediate universe of the asset that you’re looking at is key. But there definitely have been some sectors that have been more resilient. You have to separate assets into buckets.”

In contrasting private equity and corporate M&A landscapes, Pathiwille says: “It’s definitely been harder for big ticket – $1bn-plus deal value – private equity, but corporates have carried on because balance sheets are very healthy. “And the competitive landscape for corporates has been different because private equity hasn’t been playing over the past 12 months.

“There is a carve-out trend there and in those situations clients need a lot of support. As a big multidisciplinary firm, our offering plays well to those situations. Trying to carve out the operations, the financials, the services, and selling a growth strategy for the carve-out – it’s not just like selling a portfolio company.”

Big tech question

That AI and tech will have an impact on the future of advisory is no revelation. Pathiwille says it’s important to be very strategic about how they are approached and have a real understanding of what the positives are – and what is not helpful.

“On one hand, you can’t just wait for it to happen, hoping it doesn’t happen to you. And on the other, the recent reaction to ChatGPT was like there was a 10-minute window to act. You have more time than that. We need to adopt tech in a joined-up way with our global firm. It is likely to be expensive, so we need to be really smart about how we do it and deploy money to get a consistent benefit to take to market as a global structure, and support our clients with that tech.”

To get the best tech, he thinks Deloitte will use a combination of partnership and in-house development. “We should work with firms – they have the tech, we have the clients with problems that need solving – this bridge will be the right way to look at this.” 

He says that no matter what, M&A will always need the human touch of dealmakers and advisers. They bring experience of real-life deals and a human feel for how things can go, which will be very difficult for AI to replicate. Vendors or acquirers are unlikely to just say yes to a screen.

“At the moment, AI is still very much in its infancy. Even the people who created the algorithms don’t fully understand the extent to which it learns and how it learns, or the margin of error,” he continues. “How can a fund invest or a bank lend into the transactions on the basis of an algorithm? 

“If you want x amount of debt at a certain price to buy a company and you tell the bank you put the requirements into a black box and identify the best bolt-on opportunity, the bank would want to speak to someone who’s done 20 similar deals in the past, who knows about that particular company in that particular market in that particular geography. That human touch is needed.”

AI will help efficiency and understanding on certain deals, he says, on corporate carve-outs for instance. “The amount of data needed to create financials for the carve-out entity is enormous. It is pretty manual, labour-intensive and time-consuming,” he explains. 

“The ability to get there quicker, with less admin enables the adviser to do more value-add and come up with insights, trends and ideas. It’s good for advisers and clients.”