Private equity ready to pick up quality businesses next year, according to turnaround professionals.
Private equity and special situations lenders are expected to replace equity finance as the dominant players refinancing Australian businesses that undergo restructuring in 2021, says the Australian turnaround and restructuring community.
According to the results of the KordaMentha - TMA Australia Turnaround Survey, 77% of respondents expect hedge funds, private equity, and special situations funds to be more active over the next 12 months, increasing from just 55% of respondents in May 2020.
Earlier in 2020, there was a significant uplift in equity finance raisings as Australian corporates sought to support their balance sheets for the uncertainty ahead. According to the Australian turnaround and restructuring community, this source of financing is expected to weaken as the tide of government support withdraws and distressed businesses are exposed.
"Australia is pivoting toward a more distressed-focused investment environment in 2021. There will be an overwhelming volume of companies that will reach a point where DIY restructuring hasn't worked, government support is finishing and Safe Harbour protections are being lifted. In this environment, private equity is well positioned to financially support good businesses that have the opportunity to rebound once a vaccine restores business normality," said Carl Gunther, President of TMA Australia.
"Interestingly, while a significant proportion of survey respondents think that various governments have done enough to support the economy, they still believe that Australia's recession is really just commencing. The future is too difficult to predict until the end to the moratorium on directors trading while insolvent, and the cessation of JobKeeper in March 2021," said Chris Martin, Partner at KordaMentha.
The annual survey conducted by KordaMentha and TMA Australia collects key insights and opinions from a diverse range of stakeholders in the Australian turnaround industry on the current economic and business environment in Australia and the outlook ahead. Participants were asked to answer questions relating to the turnaround environment, government and legislative response, positioning for recovery and the outlook beyond Covid-19.
The survey also showed that 56% of respondents think that the extended insolvent trading moratorium to 31 December 2020 will have a positive impact on Australia's economic recovery. In the last 6 months, the survey highlighted that only 18% of respondents had provided Safe Harbour advice, bringing into question the preparedness of companies facing the distressed business environment ahead.
In addition, respondents think certain pandemic-inspired changes to working will be retained post-Covid-19, with 97% of respondents suggesting video conferencing and working from home will become the new normal.
KordaMentha is an advisory and investment firm that helps clients to grow, protect and recover value. They have a team of almost 400 specialists across Asia-Pacific with diverse backgrounds – in finance and real estate through to agriculture, law enforcement and the c-suite. Specialists who combine their unique skills and experiences to deliver fresh solutions to the region's most complex commercial challenges.
About TMA Australia
The Turnaround Management Association of Australia (TMA) is the premier industry association dedicated to turnaround management and corporate renewal. Formed in 1988, the TMA has 56 chapters worldwide with over 9,000 members consisting of lawyers, lenders, bankers, investors and other related professionals.
Across Australia the TMA has over 750 members with regional committees in NSW, QLD, WA and VIC. The association also has a NextGen subdivision which caters to the under 35 professional faction of the membership.
We provide members with numerous opportunities to network with other turnaround professionals throughout the year and access to best practice guidelines developed by leading Australian practitioners.
The TMA provides educational resources including webinars, e-learning programs, and publications as well as articles, thought pieces and case studies written by high level practitioners focusing on workouts, restructurings and corporate renewal.