Managed Solutions Intro for China by The Alta Group

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©2017 The Alta Group, LLC
2017 CHINA LEASING SUMMIT
MANAGED SOLUTIONS: IMPLICATIONS FOR
CAPTIVE / VENDOR FINANCING
Proprietary and Confidential:
The Alta Group prepared this information solely for our client: 3rd party use is permitted only with explicit advance permission of The Alta Group
Jonathan Fales
Director, The Alta Group
June 8, 2017

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► Terminology: What Managed Solutions Is
► Why It’s Important and Why It’s Growing
► Risks and Risk Mitigation
► International Considerations
Note: Most of this presentation was presented at the ELFA 2017 Equipment Management Conference
Agenda

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Terminology Clarification
• Need one term to describe the concept: Managed
Solutions
• Deliberate terminology selection to avoid the legal /
regulatory / accounting minefield
• Must also sharpen the definition or meaning around
specific parties, roles and other elements in a
Managed Solutions transaction

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What is a Managed Solutions Transaction?

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What is a Managed Solutions Transaction?
(continued)

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• The concept of - or market interest in - Managed Solutions is not new
• The industry has reached a “tipping point” due to market factors and client demand
• Managed Solutions is positioned to make up as much as 20% of industry activity
Why is Managed Solutions on the Radar Screen Now?

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Managed Solutions – A 30 Year-Old+ Concept
Selected Timeline by Equipment Type

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► “Farming as a Service”
 EM3 AgriServices, Delhi, India
 Agriculture equipment and services on-demand in Madhya Pradesh
► “Energy as a Service”
 SparkFund, Washington, D.C.
 Project financing for energy efficient products and services
• “Buy as a Service”
• “Sell as a Service”
Examples of New MSTs

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How the Model is Evolving

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► Managed Solutions: Evolutionary or Evolutionary?
 Published Fall, 2016 by the Equipment Leasing and Finance Foundation
 Researched and authored by The Alta Group
 Contains extensive research and over 30 interviews with:
• Equipment leasing companies – bank, vendor/captive, independent
• Service providers
• Legal experts
• Lender finance providers
• Rating agencies
► Ordering Information:
 ELFF website: www.leasefoundation.org
 Search under “Research
Research

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Managed Solutions: Methodology
QUALITATIVEQUANTITATIVE
QUANTITATIVE/
QUALITATIVE
SYNTHESIS
Alta used a number of
resources, including the
ELFA SEFA report to
dimension the MST
activity within the
equipment leasing and
financing industry.
Alta interviewed an extensive and
varied group of industry participants
to address the critical aspects of
MST. Interviews covered a range of
equipment lessors in the information
technology, healthcare, document
technology, agriculture, energy,
material handling, transportation,
lift truck and general commercial
equipment sectors. Interview
participants included captive,
independent and bank lessors as
well as funders, rating agencies and
service providers.
Alta analyzed the data
sources and interview
findings, overlaid with its
own knowledge of MSTs,
to reach the Study’s
findings and conclusions.

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NOT A ONE-SIZE FITS-ALL ALTERNATIVE
The Managed Services Continuum
Source: “Managed Solutions: Evolutionary or Revolutionary?,” Equipment Leasing & Finance
Foundation, 2016.

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MST Study Takeaways

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Industry Implications

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Key Risk and Risk Mitigants

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► Captives and Vendors May Be Best-Positioned to Offer MSTs
 Own relationships with service providers and/or end users
 Best access to usage history and, therefore, implicit performance risk
 Service divisions may be able to underwrite usage and performance risk
► Banks, Independents Have Challenges
 Banks:
• Frequent lack of direct relationship with service providers, end users
• No history of gauging, and pricing for, performance and usage risk
• Lack of ability to syndicate usage-based services offerings
• Regulatory issues
• “Bank footprint” issues
 Independents:
• Similar issues as banks, but fewer regulatory issues (note: syndication)
• Opportunity to participate in MST niches?
Captive/Vendor Implications

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► Asia, Latin America
 A/NZ: demand in technology, office
 In its infancy elsewhere
 Several challenges to growth, including credit infrastructure, asset management capabilities, funder
appetite
► Europe
 Strong demand in healthcare, technology, construction equipment
 Management across country borders poses a challenge, particularly legal and language
International Implications

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Questions?

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Jonathan L. Fales
Director
The Alta Group
+1 (423) 967-8871
jfales@thealtagroup.com.com

Managed Solutions Intro for China by The Alta Group

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