The Australian economy is experiencing a complex period
characterized by high interest rates, elevated insolvency rates and
a strong stock market. Interest rates have surged to their highest
level in 12 years, driven by persistent inflation, while
insolvencies are at their peak in two decades.
To better understand these conflicting signals, the Turnaround
Management Association of Australia (TMA) and Alvarez & Marsal
(A&M) conducted a survey of stakeholders from various sectors,
including lenders, advisors and business leaders. This survey
sought to gather insights into the current market conditions and
the specific challenges faced by industries such as construction,
renewable energy, private healthcare, retail and mining.
A Murky Market Outlook
To provide context to the survey responses and A&M's experts views, here is a quick snapshot of the current macroeconomic backdrop:
Key Insights
- Input inflation, wage inflation and interest rates were
the clear leaders in the greatest challenges facing businesses over
the next 12 months, across all sectors. However, in a sign
of uncertainty, there was no consensus on the direction these will
take from here.
- 37% of the respondents expect a recession within 12
months, with another 16% predicting it within 24 months.
If a recession occurs, 77% anticipate growth in the market for
operational turnarounds, 85% expect an increase in financial
restructuring, and 87% foresee expansion in the insolvency
market.
- Participants ranked construction, engineering and
infrastructure as the industry most likely to be under extreme
stress in the next 12 months (24%), followed by travel,
hospitality and leisure (18%) and retail, consumer goods and
services (17%).
- Most participants believe that organisations should
focus on cash management (63%) and cost reduction (57%) to address
market challenges. Respondents also think businesses
should enact debt restructurings and change management, but they
see companies keeping these at a much lower priority at the
moment.
- Whilst turnaround directors aren't routinely seen
as being a solution for companies, 40% of survey
participants expect them to be used much more in the next 12
months.
- Around 30% of respondents indicated that safe harbour
is delivering better outcomes for stakeholders and they
expect to see more situations where this protection is used.
- Providers of finance to distressed situations are most
likely to be specialist credit funds and private credit
funds given their ability to use their experience and risk
tolerance to deliver value, whilst also generating appropriate
returns for that risk.
Annual Turnaround Survey
A&M, in conjunction with the Turnaround Management Association, surveyed professionals in the turnaround, restructuring and insolvency space in Australia to gather their views on the industry's outlook.
How A&M Can Help
Leading companies, investors and public organisations turn to Alvarez & Marsal (A&M) to drive significant results with practical approaches that work versus theoretical approaches that don't.
A&M partners with clients to address their operational, financial and regulatory challenges, transactional needs and to make an impact.
In an interconnected and unpredictable world where Australasian
companies face disruption, financial challenges, shifting
regulation, and evolving workforce and customer demands, A&M is
uniquely positioned to support its clients in navigating these
challenges. We act as an agent of change and as a trusted partner
to enable our clients to deliver during transitional and
transformational times.
Originally published 09 September 2024
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