Expert Spotlight: Restructuring and Special Situations Opportunities in DACH

October 26, 2021 | Blog

Expert Spotlight: Restructuring and Special Situations Opportunities in DACH

By Suzy Bibko, Content Marketing Manager, EMEA

The COVID pandemic has left a far-reaching impact on a large part of the world economy. In Europe, an expected consequence of the pandemic was a massive increase in insolvency and restructuring cases. Did that actually result? Experts from the legal, financial, and advisory sectors shared their thoughts on this and other issues related to corporate restructuring and special situations opportunities, as summarized below, at the recent Munich M&A Conference (MuMAC).

Is the insolvency & restructuring wave still to come?
Many predicted a big wave of restructurings in Europe after COVID took hold. But it never really materialized. Why? First, the presence of massive liquidity in the market; second, governments across Europe developed never-before-seen state aid programs for businesses, which led to an artificial quiet in the restructuring market; and third, the quick recovery of the markets in China helped businesses in Europe overcome the crisis. In a nutshell, there has been more of a normalization of risk in restructuring situations than expected. 

However, as corporates continue to take a hard look at their portfolios, searching for growth opportunities as well as to clean them up, this will naturally lead to carve-out opportunities from both a transactional point of view and a private equity and investors point of view.

In a nutshell, there has been more of a normalization of risk in restructuring situations than expected.

State aid programs: Should they stay or should they go?
At the beginning of the COVID crisis, state aid programs were a way to provide government aid quickly and extensively to those in need. But has it gone on for too long? Many think so.

As businesses continue to be covered through aid, it continues to hide a crisis that they may not be able to see themselves. For the companies that were the target of the state aid programs, even though some of them have recovered and may have returned to the pre-Corona days, they haven't yet been able to generate enough additional cash to repay their debts. And for companies that are still not out of the crisis, repayment of debt is even harder. 

These companies also have to take care of the cost of restructuring and structurally adjust their business models to new industry realities, both on the demand and supply side. And that means financially and operationally factoring in the new normal.

Technology: Here to support complex restructuring processes
Whatever type of solution a company undertakes, technology can streamline the process. When distressed companies go to market, negotiations and deliberations need to happen very quickly and efficiently.

In the deal marketing phase, tech tools are available which enable dealmakers to reach out to hundreds of potential buyers easily and speedily, as a quick client response is key. Also, very often in these cases, there is a huge amount of data that needs to very quickly be structured; technology can enable this through smart categorization. AI tools ensure data security and compliance in transactions. Technology also provides a full track and audit on the movement of data which brings accountability and transparency to the deals.

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