Corporate Stress to Drive Turnarounds Across Asia-Pacific
AlixPartners said its report, entitled “Staying in the Game: An Outlook on Turnaround and Restructuring in Asia-Pacific 2013,” highlights that levels of corporate stress are rising across a number of countries and industries. Ninety percent of respondents expect turnarounds and restructurings to increase or stay the same over the next 12 to 18 months.
According to the survey, high levels of corporate stress are being driven by a number of factors, including principally the general macroeconomic slowness in the West (39% of respondents cited that as the top driver for restructurings in the next 12 months) and rising corporate debt levels at home. With significant levels of corporate debt set to mature across Asia in 2014, and growing reluctance of lenders to refinance, 27% of respondents cited debt and liquidity issues as the top driver for restructuring in the year ahead.
Reflecting the importance of adequate funding during a restructuring, respondents across geographies agreed that banks and private equity firms would be the primary sources for financially supporting companies in distress.
Distinct Geographic Variation
Over the coming 12 months, the survey found, that restructurings and turnarounds are expected to increase most in Japan and South Korea, followed by Greater China, India, Australasia and Southeast Asia.
Respondents were unanimous that Japanese and South Korean businesses would witness an increase in restructurings. Companies in these markets face declining demand, excess inventories, operational inefficiencies and mounting debt, all of which could force them to restructure operations to address underperformance.
A Holistic Approach to Make Restructurings and Turnarounds Work
The report’s findings also show that while financial restructuring will continue to be essential for a successful turnaround, operational restructuring execution and interim management usage is increasing throughout the region. Together, these three aspects create what AlixPartners calls a “holistic-turnaround” approach, which seeks to address all areas of distress to correct a company’s course.
To read the entire report release, click here.