Executive Summary

1

19

Image result for kpmg

Internship First Progress Report

Tuleen Basrawi

1310186

BNFN 4303 Internship Banking and Finance

Instructor: Ms. Dunia Mamlouk

Sunday, July 29, 2018

Table of Contents Executive Summary 3 Internship objectives 4 Objectives for the Intern 4 Internship organization Objective: 4 University Objective: 5 Internship scope 5 Background about internship organization 5 Mission 6 Vision 6 Services that the company have in Saudi Arabia 8 Audit 8 Tax and Zakat 8 Advisory 9 Department in which intern is having her training at 9 Challenges faced a deal advisory department and suggested solutions 12 Conclusion 14

Executive Summary

An internship is an opportunity for students to apply theory learned in class to practice. This opportunity is beneficial to students who want to gain in the corporate world through presenting them with real work experience. The intern is doing her practice at KPMG from 24th June to 24th September, 2018 at the deal advisory unit. The well reputed company has several branches across the globe and offers services in relation to audit, tax and Zakat and advisory. Their objective is to build and offer professional services by building trust among clients. KPMG in Saudi Arabia continues to significantly invest in its Advisory practice. This investment is reflected in the breadth of services provided to companies, intermediaries and public sector bodies in key areas such as deal advisory, risk consulting and management consulting and real estate. The company assists clients to address many urgent strategic and operational challenges in the current business environment. Over the last five years KPMG has been the leading company in providing professional services in Saudi Arabia. The company has three offices in the Kingdom located at Jeddah, Riyadh, and Al Khobar and has employed more than 823 people. The main responsibility of KPMG is to challenge its customers to view themselves as well as their market in a different perspective. The primary objective of KPMG is to sustain and enhance a quality professional workforce. The organization is a major contributor of international capital markets by supporting reforms that reinforces social responsibility and markets credibility. KPMG clients include public sector agencies, business corporations, nonprofit organizations and governments. The major investment made by KPMG was to invest in its people and through hard work and support of their clients they have nourished in the business. Trust and integrity have been core features in ensuring that firm continues to be the leading company which offers audit, tax and Zakat and advisory

Introduction

Internships offer several benefits to students and graduates. Through training offered in companies, students broaden their knowledge and experience and gain an upper hand in obtaining employment after school. Internships offer flavor for what to expect in a job situation and trainees build better resumes. It is also an opportunity to interact and meet new people who can act as mentors toward career goals. As such, interns should take advantage of the benefits offered and expand their ideologies in corporate background.

Internship objectives

Objectives for the Intern

· To gain practical knowledge in conducting business activities in an actual working environment so as to be familiar with real job experience.

· Another objective is to interact with other team members within the financial institution in order to create meaningful relations.

· To gain better knowledge in analytical skills in a real job environment so as to gain valuable skills in employment such as communications and attention to details.

· Gain exposure to working environment and employer expectations in professional deal financing and corporate accounts.

Internship organization Objective:

· To enrich the trainees experience and improve the skills required to through a structured training program.

· The training program focuses on improving the and examine the trainee’s behavioral, business, soft and analytical skills

University Objective:

· This course provides the opportunity to gain knowledge through actual job experience in the profession. Internships represent job experience which is aimed at supplementing the classroom learning process and to allow familiarization with real world experiences related to the Banking and Finance profession. The internship program period covers 180 hours of working experience applied at a bank or a related financial institution locally or internationally.

Internship scope

The duration of the internship is three months running from 24th June to 24th September. The internship was conducted at KPMG Al Fozan & Partners in Zahran Business Center starting from 9am and ending at 6pm. I was based in the corporate finance and real estate division under the deal advisory department.

Background about internship organization

KPMG operates as a global network of independent member firms offering audit, tax and advisory services; working closely with clients, helping them to mitigate risks and grasp opportunities. Member firms’ clients include business corporations, governments and public sector agencies and not-for-profit organizations. They look to KPMG for a consistent standard of service based on high order professional capabilities, industry insight and local knowledge. KPMG member firms can be found in 155 countries. Collectively they employ more than 183,965 people across a range of disciplines.

Various industry bodies have accredited KPMG with several local and international achievements over the years as well as recognized its outstanding audit, tax and advisory services success with rewards. For instances, in 2017, Euromoney recognized KPMG as the best “Real Estate Tax Service” provider globally; the Forrester Wave™ named KPMG International as a leader in Information Security Consulting and one of the world’s top business transformation consultancies; HfS’ Blueprint Report recognized it as a top-tier provider on digital technology strategy and consulting services; it was recognized in the 2017 World’s Best Outsourcing Advisors list; and awarded as the Asia Tax Firm of the Year, among many others. In 2018, KPMG has already bagged 21 regional and national awards at the Asia Tax Awards 2018; selected for the Skills Future Award; recognized by HfS Blueprint report as a top-tier provider on Internet of Things services and as a leading “software-as-a-service” provider; named as the SAS regional partner of the year for Asia Pacific; recognized in the Forrester Wave™ as a leader in Microsoft Dynamics 365 services; and recognized by ALM Intelligence as a leader in corporate services consulting.

KPMG in Saudi Arabia has made several achievements following its award-winning services. For instances, KPMG’s Real Estate team in all of the three offices in Riyadh, Al Khobar, and Jeddah have thrived in providing different types of real estate advisory services that saw it ranked by Euromoney as the 1st real estate advisor among the Big 4 companies and third best overall in the Kingdom in 2016. At the MEED Awards 2017 held in Dubai, the United Arab Emirates, the KPMG in Saudi Arabia won the Advisory Services Company of the Year for its outstanding advisory services to organizations ranging from governmental bodies such as authorities and ministries to private sector organizations. KPMG in Saudi Arabia and its network of firms have been recognized with many other rewards for various special achievements over the years, which demonstrate their success as an employer, market leader, and in giving back to the community.

Mission

To be the best in everything we do, turning out experience and industry knowledge into value for clients.

Vision

To be your clear choice of professional services firm by attracting and keeping the best people, winning the best mandates, doing the best work for the clients and being the most trusted firm.

Sustaining and enhancing the quality of this professional workforce is KPMG’s primary objective. Wherever we operate we want our firms to be no less than the professional employers of choice. We contribute to the effective functioning of international capital markets. We support reforms that strengthen the markets’ credibility and their social responsibility. We believe that similar reform must extend to the professional realm. KPMG in Saudi Arabia was established through its member firm KPMG Al Fozan& Partners and has operated in the Kingdom since 1992.This early commitment to the Saudi Arabian market, together with our unwavering focus on quality, has been the foundation of our accumulated industry experience, and is reflected in our appointment by some of the Kingdom’s most prestigious companies.

As Saudi Arabian businesses join the global economy and international companies seek to enter the Saudi market, KPMG’s blend of international expertise and local knowledge makes us well positioned to serve our clients in this increasingly complex, but exciting market. KPMG operates through a national leadership with dedicated regional teams, which enables our network of professional talent, our technologies and our products and solutions to quickly come together to meet clients’ needs.

KPMG has made a significant investment in Saudi Arabia over the last five years with a number of professional staff being seconded to the local firm from across the global network. The firm has grown to be one of the largest professional service providers in the Kingdom. During the last few years, it has achieved record growth, reaching our current workforce of more than 823 people across the Kingdom, based in three offices in Riyadh, Jeddah and Al Khobar. KPMG’s objective is to be the best in everything we do, turning our experience and industry knowledge into value for our clients.

KPMG member firms provide Audit, Tax and Advisory services, delivering a globally consistent set of multidisciplinary financial and accounting capabilities based on deep industry knowledge. They work for a wide range of clients, from global organization to entrepreneurial start-ups. Our focus on Global Industries helps us to develop a rich understanding of our clients’ businesses, together with the insight, skills and resources required to address industry-specific issues and opportunities. Our role is to challenge clients to look at themselves and their markets in new ways. We believe we are ideally placed to serve you and provide the professional services you need. We believe to be the ideal choice for you in Saudi Arabia for the following reasons:

· Our position as a principal provider of audit and advisory services to global and regional clients

· The quality and experience of our people

· Our in-depth understanding of your industry

· Our value added deliverables

· The provision of excellent value for money

KPMG‘s Government and Public Sector divisions work to deliver meaningful results through a deep understanding of the issues, an intimate appreciation of how the public sector works, and global and local insight into the cultural, social and political environment.

Services that the company have in Saudi Arabia

Audit

Integrity, quality and independence are the building blocks of KPMG’s approach. Our audit process does more than assess financial information. It enables our professionals to consider the unique elements of the business – its culture, the industry in which it competes, competitive pressures and the inherent risks. Main services for the audit department are financial statement Audit, Reporting Accountant services and other assurance services.

Tax and Zakat

The Zakat & Tax at KPMG in Saudi Arabia comprises of highly qualified international and Saudi nationals with extensive local and international experience.

Our professionals have more than 80 years of combined experience in Saudi Arabian Zakat and Tax law and regulations. We believe that our team of professionals and our understanding of Saudi Zakat and Tax law, regulations and practice help us deliver quality service to clients. Their main services under the tax department are international tax, domestic & Zakat, corporate services and indirect tax

Advisory

KPMG Advisory professionals work with you to cut through the complexity of today’s rapidly changing marketplace. We leverage the knowledge and skills across our global network of firms to develop practical recommendations designed to help you work smarter, grow faster and compete stronger. We are trusted advisors to the world’s organizations. They choose us because we are known for our talented people, technical expertise, deep industry insights and our ability to get the job done.

KPMG is aligned along five industry groups:

A. Capital Markets

· Financial services

· Banking

· Insurance

· Investment Management

B. Industrial markets:

· Energy & Natural Resources (Chemicals & performance technologies, mining, oil and gas, power & utilities)

· Automotive

· Industrial manufacturing

· Life Sciences (previously pharmaceuticals)

C. Consumer markets:

· Food & Drink

· Consumer Goods

· Retail

D. Technology, Media& Telecommunications:

· Telecommunications

· Technology

· Media

E. Infrastructure, Government & Healthcare

· Government & public sector Both “Level & Focus Area”

· Building & construction

· Transport & Leisure

· Healthcare

· Professional & Business Services

Summary on the departments’ operations and challenges faced

KPMG has several departments dedicated to providing professional services that include audit, accounting, tax and advisor, and legal advisory to business corporations, public sector agencies, government, and nonprofit organizations. Several factors have made KPMG one of the largest professional service providers and the ideal choice for most clients who need their services in Saudi Arabia. The organization has served the Saudi Arabia market since 1992, which has equipped it with adequate local knowledge and deep industry knowledge. It also has member firms operating in over 155 countries that give it international expertise, global insights, and ultimately a rich understanding of their global and local clients’ needs. In addition, KPMG has made a significant investment over the years that include sustaining and enhancing its professional workforce, taping professional talents, and improving its technologies, products, and solutions. These investments have helped it develop the skills and resources needed to address industry-specific opportunities and issues.

The departments offering audit services not only assess a client’s financial information but make an effort to understand the business’s culture, competitiveness in the industry and inherent risks in order to offer the most appropriate services. Tax and Zakat departments are run by a team of professionals with extensive experience in Saudi Arabian Tax and Zakat law and regulations that help them deliver quality services to clients. The professionals working in the advisory departments utilize the deep industry insight accumulated from local and international experience to help their client work smarter, grow faster and compete stronger.

I was placed as a trainee in the Corporate Finance function of the Deal Advisory department.

KPMG’s deal advisory department hasfive sections that deal with buying of a business, selling of a business, partnering, funding a business and fixing a business. The department has specialists who merge local experience and global mindset with analytical tools to guide clients on how to add value to their businesses as well as initial concepts of obtaining enterprises and turning them around in times of recession. During my training period, I was allocated several tasks in some of the projects in the deal department.

I had the opportunity to participate in the Corporate Finance function of Deal Advisory department in which I assisted in two projects where KPMG was providing sell-side M&A assistance services to a client operating in automotive and another client in Food & Beverages (F&B) sector. The assignments involved preparing a business plan by carrying out research on the respective sectors, conducting historical financial analysis on clients’ financial statements, and conducting the valuation of clients’ businesses. I completed the assigned tasks using Excel and PowerPoint applications as well as applied several financial analysis techniques and valuation methodologies. I was also engaged in compiling a list of potential investors that might be interested in buying the respective businesses. I also had another opportunity to participate in the real estate function in which I observed and discussed one of Real Estate team’s Project with a Senior Associate working in the Real Estate team. The project required the team to conduct a site analysis on the client’s land located in city Jeddah and determine the demand drivers and the level of competition around that particular area.

I observed a few challenges that hampered operations at the deal advisory department. They included delayed payments by clients leading to low collection of account receivables, few client turnouts, handling clients with incomplete documents, and problems with ensuring high confidentiality and accuracy of clients’ information. The suggested solutions to these challenges included rating and charging clients immediately after services, improving the advertising and promotion of advisory services, accumulating all necessary documents from clients before starting any technical work, and emphasizing the devastating consequences of not maintaining high confidentiality and accuracy of clients’ information to employees.

During my assignment on the project for the client operating in the automotive sector, I was responsible of various tasks related to the market research, historical analysis, financial modeling, valuation preparation, teaser preparation, potential investor list preparation.

Market Research

This assignment involved preparing an information memorandum, which includes a market overview section. I was assigned to gather market data related to the automotive sector, its drivers, and composition (specifically the repairs and maintenance segment). I gathered the data, I found through multiple sources online and submitted them to the seniors in the team. Also, I was responsible for preparing graphs and charts using the data I found to be inputted into the report.

Historical analysis

I was assigned the task of analyzing the client’s audited financial results for the past three years. The purpose of this exercise is to derive the historical financial and operational data required to estimate and project the financial statements during the projection period (next five years). To gather this data, I entered the income statement, balance sheet, and cash flow statement on excel and performed vertical and horizontal analysis. This includes, calculating revenue growth, gross profit margin, EBITDA margin and net income margin. Next step was to prepare a summary of the results in input them into the model prepared by the seniors in the team.

Financial Modeling

After analyzing the historical financial results, I was responsible for inputting them into the model and assist in building the assumption sheet of the model. This involved using the historical cost margins for maintenance, utilities, cost of parts and training expenses (as a percent of revenue) and applying them to the projection period.

Valuation Preparation

After completing the projections in the model, I was given the task of assisting in conducting the valuation using the multiples or market approach. I was responsible for using Capital IQ market research tool to gather data on publicly listed companies operating in the automotive sector. As an initial step, I had to screen the companies based on their geographic location (main focus was on companies operating in the Middle East), their business nature (car oil change, car wash, and car service). Next, I gathered and summarized their multiples including EBITDA multiples, P/E multiples, and EBIT multiples. I applied further screening by removing outliers (companies with relatively either very high or very low multiples compared to the peers in the screened list). Finally, I calculated the average of each multiple for the screen companies and applied them to the most recent financial results of the client to derive the valuation based on each multiple. This resulted in a valuation range and I presented them to the seniors in the team.

Teaser Preparation

Once the director reviewed the valuation, a teaser had to be prepared to present to potential investors to test their appetite towards investing in the opportunity. I was given the responsibility of preparing the teaser from scratch. This involved summarizing the results in the information memorandum to display them into a two-page teaser. The sections that were summarized were the transaction overview, company overview, market overview and opportunity overview.

Potential Investor List preparation

Once the teaser was prepared, it was supposed to be disseminated to potential investors. My task was to prepare a list of the investors who would be interested. This involves using Capital IQ to compile the companies operating in the same industry and summarizing their contact details including (emails, phone numbers, websites, and a brief description of their business).

 

Conclusion

In conclusion, KPMG Saudi Arabia is one of the biggest companies providing Audit, Consultancy and Tax services and with a large client base. Trainees under the firm gain a lot of knowledge and technical expertise. Under the intern program, students are able to relate what they learn in university with real time job experience and skills in accounting and advisory. The program is beneficial to interns since the employees are helpful and thoughtful. Besides this, the integrated program consists of training programs, counselors and friends who together assist the intern to be fully exposed to necessary operations.

Personal Experience, Observations and Recommendations

After working at KPMG as an intern for three months, I recommend the company as a nice place, especially for novices. It has a good working environment that offers great exposure to many core business operations and a high level of diversity management that allow students and individuals who are starting their careers to gain many knowledge and experiences. It has a highly motivated culture and extremely intelligent people who have the desire to guide trainees complete the challenging, complex assignments and help them improve. KPMG also seem to have a good future prospect and thus a potential employer of interns in future.

However, despite offering tons of opportunities for novices, there are a few negative observations made about the organization during the internship. I have heard from some of the full-time entry-level Associates that there is more workload during busy seasons that affect work-life balance and poor pay relative to hours worked and qualifications. The management should try to work more efficiently and try to fix the problems raised by the employees as they are the key engine of the company. In addition, despite many departments selling great digital tools to their clients, they do not always use them in-house. For instance, the Deal Advisory Department had launched an online system for making the process approving technical work faster, but it was not fully operative. The departments should make maximum use of available technologies as well as use those they sell in-house.

References

Appendix

Insights | Kpmg | Sa

https://home.kpmg.com/sa/en/home/insights.html

Kpmg International | Kpmg | Global

https://home.kpmg.com/xx/en/home.html

Dar Al Hekma

http://www.dah.edu.sa/

KPMG. (2016, September 29 ). KPMG Real Estate Achievements. Retrieved 8 13, 2018, from KPMG: https://home.kpmg.com/sa/en/home/industries/kpmg-real-estate-services/kpmg-saudi-ranks-3rd-place-in-the-euromoney-real-estate-awards-2.html

KPMG. (2017). KPMG wins award at the Meed Awards 2017. Retrieved 8 13, 2018, from KPMG: https://home.kpmg.com/sa/en/home/insights/2018/11/kpmg-wins-award-at-the-meed-awards-2017.html

KPMG. (2018). Awards and Rankings. Retrieved August 13, 2018, from KPMG: https://home.kpmg.com/sg/en/home/about/awards-and-rankings.html