NEW YORK, May 21, 2013 (GLOBE NEWSWIRE) -- AlixPartners, the global business advisory firm, today announced the findings of a major study into corporate health and the outlook for corporate turnarounds and restructurings across Asia-Pacific. The report, entitled "Staying in the Game: An Outlook on Turnaround and Restructuring in Asia-Pacific 2013" and based on in-depth interviews with 150 bankers, lawyers, fund managers and other restructuring experts from across the Asia-Pacific region, highlights that levels of corporate stress are rising across a number of countries and industries, with 90% of respondents expecting 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, together with increasingly intense local, regional and global competition, widespread capacity expansion across a number of industries and big regulatory changes throughout the region. 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, with distressed investing by hedge funds also becoming part of the mix.
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.
While Greater China has yet to suffer a serious economic downturn, 86% of respondents believe that it will witness an increase in restructurings over the coming 12 months, attributed to a number of factors, including:
- the intense competition now faced by formerly strong foreign multinational corporations (MNCs) from ambitious fast-growing local competition that want rapidly to gain market share -- for example, in the retail sector;
- the slowdown throughout much of the world and limited domestic demand, which has put pressure on highly leveraged Chinese companies;
- overcapacity and inefficiencies in specific sectors, including solar and steel; and
- the need for state-owned enterprises (SOEs) to restructure in order to effectively compete with both MNCs in China and private firms.
Widespread Industry Vulnerability
In terms of industry vulnerability, the financial services, industrial and automotive sectors were singled out as the top three industries in need of restructuring across Asia-Pacific, with stress also expected in real estate, retail, telecom, electronics, airlines, shipping and renewable energy.
Seventy-six percent of respondents cited financial services firms as most in need of restructuring, with the growth in non-performing loans and structural changes imposed by central banks in Asia Pacific cited as key drivers. The industrial and automotive sectors are expected by 70% and 69% of respondents, respectively, to need turnarounds and restructurings.
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, the importance of executing operational restructuring as well and of using interim management, such as a chief restructuring officer (CRO), 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.
Respondents indicated that Asia-Pacific-based companies are as or more likely to use a CRO as their Western counterparts. This stands in stark contrast to some local perceptions about not trusting "outsiders," and may signify a shift toward a more open-minded approach to revitalizing companies. Bringing in a CRO was also viewed by survey respondents as an integral element of making broader changes in senior management and organizational structures during a restructuring.
CV Ramachandran, managing director and head of Asia for AlixPartners, commented, "As corporate distress levels rise across the Asia-Pacific region, owners and managements need to take swift and decisive action to preserve and build value for the future. While there is no 'one-size-fits-all' solution for different companies across such a diverse region, the combined elements of a holistic turnaround are key to the future success of these companies."
AlixPartners is a global business advisory firm offering comprehensive services in four major areas: enterprise improvement, turnaround and restructuring, financial advisory services and information management services. Founded in 1981, the firm has offices around the world, and can be found on the Web at www.alixpartners.com.
About the Study
AlixPartners' "Staying in the Game: An Outlook on Turnaround and Restructuring in Asia-Pacific 2013" is in part the result of a January to February 2013 survey AlixPartners commissioned with Remark, publishing division of Mergermarket, to capture and analyze the perspectives of 150 corporate-restructuring experts in the Asia-Pacific region. They include bankers, lawyers and fund managers who recently completed a turnaround or restructuring.