2009 Annual Report (PDF) - FTI Consulting

In reaction to publicized incidents in which electronically stored information has been lost, illegallyaccessed or stolen, many states have adopted breach of data security statutes and regulations. In addition, manynon-U.S. jurisdictions have data privacy laws applicable to personal information. Continued governmental focuson data security may lead to additional legislative and regulatory action. The increased emphasis on informationsecurity and the requirements to comply with applicable U.S. and foreign data privacy laws and regulations mayincrease our costs of doing business and negatively impact our results of operations.Risks Related to CompetitionIf we fail to compete effectively, we may miss new business opportunities or lose existing clients and ourrevenues and profitability may decline.The market for our consulting services is highly competitive. We do not compete against the samecompanies across all of our segments or services. Instead we compete with different companies or businesses ofcompanies depending on the particular nature of a proposed engagement and the requested service(s). Ourbusinesses are highly competitive. Our competitors include large organizations, such as the global accountingfirms and the large management and financial consulting companies that offer a broad range of consultingservices, investment banking firms, consulting and software companies, which offer niche services that are thesame or similar to services or products offered by one or more of our segments, and small firms and independentcontractors that focus on specialized services. Some of our competitors have significantly more financialresources, a larger national or international presence, larger professional staffs and greater brand recognition thanwe do. Some have lower overhead and other costs and can compete through lower cost service offerings. Sinceour business depends in large part on professional relationships, our business has low barriers of entry forprofessionals electing to start their own firms or work independently. In addition, it is relatively easy forprofessionals to change employers. If we cannot compete effectively with our competitors or if the costs ofcompeting, including the costs of retaining and hiring professionals, becomes too expensive, our expectedrevenue growth and financial results may differ materially from our expectations.We may face competition from parties who sell us their businesses and from professionals who cease workingfor us.In connection with our acquisitions, we generally obtain non-solicitation agreements from the professionalswe hire, as well as non-competition agreements from senior managers and professionals. The agreements prohibitsuch individuals from competing with us during the term of their employment and for a fixed period afterwardsand seeking to solicit our employees or clients. In some cases, but not all, we may obtain non-competition ornon-solicitation agreements from parties who sell us their business or assets. The duration of post-employmentnon-competition and non-solicitation agreements typically range from six- to 12-months. Non-competitionagreements with the sellers of businesses or assets that we acquire typically continue longer than 12 months.Certain activities may be carved out of or otherwise may not be prohibited by these arrangements. We cannotassure that one or more of the parties from whom we acquire assets or a business and who do not join us or leaveour employment will not compete with us or solicit our employees or clients in the future. Such persons, becausethey have worked for our company or a business that we acquire, may be able to compete more effectively withus, or be more successful in soliciting our employees and clients, than unaffiliated third parties.Risks Relating to our Acquisition StrategyIf we fail to find suitable acquisition candidates, or if we are unable to take advantage of opportunisticacquisition situations, our ability to expand our business may be slowed or curtailed.If the competition for acquisitions increases, or if the cost of acquiring businesses or assets becomes tooexpensive, the number of suitable acquisition opportunities may decline, the cost of making an acquisition mayincrease or we may be forced to agree to less advantageous acquisition terms for the companies that we are ableto acquire. Alternatively, at the time an acquisition opportunity presents itself, internal and external pressures29