Prominent global professional services firm Alvarez & Marsal (A&M) today released the first edition of its Middle East Turnaround and Restructuring Survey for Q1 2023. The survey asked respondents to indicate whether they anticipate an increase or decrease in businesses experiencing financial distress across the GCC, together with their views on the extent of intervention by turnaround specialists that will be required.
Key findings
- The vast majority – 89 percent – of respondents] are expecting an increase in businesses experiencing distress in 2023-2024 and see a need for specialist intervention in critical areas including liquidity management, cost reduction, capital efficiency, and margin optimization.
- 75% of respondents expect economic growth to slow or reverse, with the greatest issues expected to face businesses including cost of capital, inflation, market volatility, weakening demand, and changes in tax and regulation.
- Businesses across the GCC are expected to see an increasing need to transform or restructure in a volatile market. Ongoing macroeconomic headwinds mean that respondents expect businesses across many sectors to experience a period of under-performance leading to increased liabilities and cash constraints.
- Retail, financial services, real estate and industrial companies dominated restructuring activity in 2022 and remain under pressure in 2023.
- A large majority (79 percent) of respondents see many restructurings that deal only with debt without an accompanying operational fix. Those same respondents (70 percent) consider that an operational restructuring should indeed accompany a financial restructuring in most cases.
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Paul Gilbert, Managing Director, and Co-Head of Alvarez & Marsal in the Middle East, commented: “The results of the survey are fascinating. While a number of economies and sectors across the Middle East are bucking the trend, it is clear that respondents consider other sectors to experience further underperformance and liquidity pressures in the face of global economic headwinds. With rising interest rates and inflation, many struggling businesses are seeking short-term solutions to their debt burden.”
“Unless the underlying operational business issues are also fixed, then too often a “restructured” business will find itself in distress again further down the line. Respondents to the survey clearly agree that fixing a business’s underlying performance issues at the same time as carrying out a financial restructuring is the best way to deliver a longer-term and more sustainable turnaround,” Gilbert added.
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