(Reuters) – Consulting firm Capvision Partners has found itself in the spotlight after Chinese police raided its offices over what state media reported were national security issues.
The company, set up by former Bain & Co consultants and Morgan Stanley investment bankers in Shanghai in 2006, specialises in putting experts in various industries in contact with firms and investors.
Its clients include banks, consultancies and Fortune 500 companies.
Following are some details on the firm, what it does and what it is being accused of:
WHAT DOES CAPVISION DO?
Capvision Partners provides what it describes as “expert network” services, a consulting industry segment that has grown rapidly in China in recent years as investors seek insights on business in the world’s second-biggest economy.
The company acts as an information middleman, connecting financial institutions, consulting firms and global companies with what it says is a network of more than 450,000 of mostly Chinese experts in sectors ranging from healthcare to technology.
Capvision arranges contacts for clients who pay from 500 yuan ($72) to $10,000 an hour, depending on the expert’s seniority, knowledge, and the type of questions the client wants answered, Capvision said in a prospectus last year when it sought a listing in Hong Kong that did not come to pass.
Its founder and CEO, Xu Rujie, previously worked at China Resources (Holdings) Co Ltd, Siemens China and General Motors (China) Investment Co Ltd.
WHO ARE ITS CLIENTS?
Its top five clients are Chinese financial institutions, which account or about a quarter of revenue, it said in the prospectus.
At the end of September 2021, it said it helped 16 of the world’s top consulting firms, and 90% of the most active private equity and venture capital firms in China. It said China’s 20 biggest brokerages by assets, and nine of China’s top 10 tech companies, were clients.
It did not identify the clients.
Its mainland China offices are in Shanghai, Beijing, Suzhou and Shenzhen. It also operates in New York, Hong Kong, Singapore and Kuala Lumpur, it says on its website.
It generates 95% of its revenue within Greater China, which includes Hong Kong, it said in its prospectus.
HOW HAS IT GROWN?
It said its revenue in 2020 accounted for a third of all revenue from China’s “expert network” industry.
Globally, Capvision is one of the largest such companies in a market of more than 150 such firms including GLG, AlphaSights and Third Bridge, according to research firm Inex One.
Capvision said in its prospectus it had revenue of 648 million yuan in 2020, up from 385 million yuan in 2018, representing annualised growth of 29.2%. Net profit grew 40% each year during the period, with a gross margin of roughly 50%.
Its “expert network” has grown to more than 450,000, almost doubling from 230,000 at the end of 2018, it said.
But it acknowledged there were geopolitical risks that could have a negative impact on its business.
“Measures taken by Chinese or U.S. government may restrict our transactions with domestic and overseas entities … and may result in investors losing confidence in Chinese companies and their counterparties, including us.”
ALLEGATIONS
State broadcaster CCTV, citing police, accused Capvision on Monday of luring experts to divulge sensitive information and even state secrets in exchange for high pay.
Capvision said in a statement after the CCTV broadcast it would resolutely abide by national security rules and would take the lead in ensuring the consulting industry was compliant. Staff declined interview requests when reached by Reuters on Tuesday.
CCTV said Capvision concealed the identity of foreign clients to its experts and was lax in compliance in pursuit of economic benefits. The broadcaster said foreign institutions used domestic consulting firms to get information on sensitive industries.
CCTV said Capvision’s network included more than 1,000 experts in defence and military areas and it accepted consulting jobs from overseas companies with close ties to governments, militaries and intelligence agents.
Between 2017 and 2020, Capvision accepted more than 2,000 remittances worth more than $70 million from more than 100 overseas companies, CCTV said.
(Reporting by Samuel Shen, Li Gu and Brenda Goh; Editing by Robert Birsel)
