Chinese technology company Alibaba Group on Tuesday said it will restructure its business into six commercial groups and explore listings for most of them, as it aims to become “nimble” and boost its operations.
The major revamp is designed to “unlock shareholder value and foster market competitiveness”, said the Hangzhou-based company, which specialises in e-commerce, retail, internet and technology.
The six business groups will be: Cloud Intelligence, Taobao Tmall Commerce, Local Services, Cainiao Smart Logistics, Global Digital Commerce and Digital Media and Entertainment.
This transformation will empower all our businesses to become more agile, enhance decision-making and enable faster responses to market changes
Daniel Zhang,
chairman and chief executive of Alibaba
The restructuring will provide “markets with better visibility into the value of Alibaba’s various businesses and unlock shareholder value”, the company said.
Daniel Zhang will continue to serve as chairman and chief executive of Alibaba, which will follow a holding company management model, while each of the six business groups will be managed by its own chief executive and board of directors.
Mr Zhang will also serve as the chief executive of the Cloud Intelligence Group, which will house all cloud, artificial intelligence activities and businesses like DingTalk.
“The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs [initial public offerings] when they are ready,” Mr Zhang said in a memo to employees.
“This transformation will empower all our businesses to become more agile, enhance decision-making and enable faster responses to market changes.”
Alibaba’s business is booming. In the quarter that ended on December 31, 2022, its net income jumped 138 per cent on a yearly basis to more than $6.6 billion. The company's sales rose 2 per cent annually to more than $35.9 billion in the October-December period.
Restructuring is not new to the company.
In 2015, it introduced a middle-platform strategy that gave rise to a “large middle platform, small front office” organisational model.
In 2020, it implemented a diversified organisational governance structure that empowered key businesses with management responsibility.
The latest initiative marks one of the most significant governance overhauls in Alibaba's 24-year history and intends to position the company’s businesses to become “more agile so as to better capture market opportunities and stimulate growth”.
The Taobao Tmall Commerce Group will include China commerce activities such as digital marketplaces Taobao and Tmall, value-for-money platform Taobao deals, community marketplace business Taocaicai, wholesale marketplace 1688.com and other businesses.
Each business group will retain the flexibility to raise outside capital and seek an IPO. The Taobao Tmall Commerce Group will be an exception as it will remain wholly-owned by Alibaba.
The restructuring news comes a day after Jack Ma, Alibaba's co-founder, was seen in China after a long absence. The billionaire on Monday visited a private school in the eastern city of Hangzhou, where the company has its headquarters.
Mr Ma, 58, who has rarely been seen in public in the past three years, has kept a low profile since China’s regulatory crackdown on his companies in late 2020.
How Beautiful this world is!
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
