Marcum Bernstein & Pinchuk Featured in China Business Knowledge Article "Come What May, MBP Won't Be Giving Up Its Seat at the Table"
China Business Knowledge
For those who have been operating for a time in the sector of China-based/U.S. listed companies it might come as a surprise that Drew Bernstein, of Marcum Bernstein & Pinchuk LLP, was not keen on his firm taking on its first China client. In fact, it was his partner, Neil Pinchuk, who convinced him in 2000 that China was a good market for the firm.
The firm, which was simply Bernstein & Pinchuk then, had clients abroad, mostly in Europe and Israel, and mostly in the real estate sector. Asia was not in the plan. But a client made an introduction to a team of Chinese executives, led by a bilingual intermediary named Anna Ji, who wanted to bring their company to the U.S. capital markets.
Pinchuk invited the team to B&P’s New York offices. Bernstein remained reticent, but the first meeting went well enough that a decision was made to send Bernstein to visit the company’s headquarters in 2001. He was so certain they would not be doing business in China for the long term that when he found himself with a six hour layover in Beijing, he left the airport for a brief tour of the city. “I did not think I was going to be in China again,” he said. “So I thought I should at least see The Forbidden City and Tiananmen Square.”
Two years later Bernstein & Pinchuk opened its first office in China, and Tangential to that, Bernstein and Anna Ji are now a couple with a young son. Simply by proximity, Anna played–and continues to play–a crucial role in the firm’s understanding of the Chinese business culture.
Later the firm became an independent member of the BDO Seideman Alliance. But the firm reevaluated its China strategy in 2010 after the onslaught of short sellers started targeting China-based/U.S. listed companies under the guise of being “research firms.” None of B&P’s clients were targeted, but Bernstein sat on the board of the first company to be attacked, Orient Paper Inc. (NYSE Amex: ONP).
He thought a good offense is the best defense and believed the best way to do that was by having a deeper team of people to tap with mid-cap, public markets experience. The firm dropped its affiliation with BDO and hitched its wagon to the respected middle market firm Marcum LLP, creating a joint venture dubbed Marcum Bernstein & Pinchuk LLP (MBP) in January 2011.
The new firm would focus strictly on the China market. It was not a full merger, but more like a joint venture. Bernstein & Pinchuk LLP proper continues to service its non-China clients. Marcum’s presence in China is only through MBP. Potential new clients are put through an acceptance process and both firms need to agree to take them on. Both also have to sign off on the audits. “We agreed that if one of us is not comfortable signing off, then we don’t sign off,” Bernstein said.
MBP now has 75 employees on the ground in greater China, with offices in Beijing, Hong Kong, Shanghai, Guangzhou, and Hangzhou. All are bilingual. Most have graduated from top universities. At least 70 of them have Big Four experience.
After one and a half years the two firms are comfortable with each other and Bernstein sees a future where the relationship becomes more entwined. “B&P still has what I call `remnant clients’ and we do perform services for the smaller clients but the strategy is to eventually integrate with Marcum,” Bernstein said. “Now any U.S. client that comes to us we route into the Marcum `house’. My goal is to build the Marcum brand since this is our home and bring that level of credibility to China.”
In respect to the short selling attacks, which have subsided a bit, MBP took on two clients after the fact, IDI Search Media and Auto China AUTC and helped them resolve much of their financial issues. In respect to ONP, the company was able to restore its reputation and disprove many of the allegations, in a large part because of Bernstein’s perseverance and good relationship with ONP’s CFO, Winston Yen, and ONP management as a whole. In addition, Bernstein was instrumental in helping to settle all the shareholder class action suits for only $2 million.
Bernstein is ubiquitous, speaking at numerous conferences world-wide, while keeping a close eye on his clients. Having been one of the first on-the-ground accounting professionals in China focused on middle-market companies, he is often quoted in the press. Earlier this year, he wrote an adept and frank article about the state-of-the-market in the aftermath of the short-seller attacks: “How to Get Them Back to the Banquet.”
While many professional services firms are taking their profits and fleeing the China market during these turbulent times, MBP, is not giving up its chair (or chairs) at the table.