Will turnaround markets in 2012 be busy? Will we see a continued interest from private equity to fund turnaround deals?
By Susan Moor | Published: 30 January 2012 | Comments (0)
A couple of weeks ago we hosted a roundtable, together with the Turnaround Management Association (TMA) UK, where we invited experts from the turnaround and private equity industry to discuss lessons from 2011 and predictions for 2012.
A few observations stood out and we thought these worth sharing:
- There is a continued appetite from private equity (PE) firms for the right turnaround deal – but the focus is on those deals where operational changes could lead to a significant improvement in performance
- PE firms have cash available to invest, but are carefully identifying the right opportunities
- PE firms recognise that the majority of deals, in order to be successful, require additional expertise being added to the incumbent management team. This is either in the form of a specialist within the PE firm or an external turnaround or interim manager
- Without asset based lenders, many of the PE deals of 2011 would simply not have happened. Looking ahead to 2012 this trend is expected to continue
- There are a growing number of so-called "zombie companies" where operational change is as important as financial support
- There is an increased appetite for cross-border deals from those firms able to operate internationally. There has been a particularly high level of work in Spain, where the need for experienced advisers and turnaround managers is high.
From my perspective what was most interesting was the overwhelming sense that turnaround deals in 2012 will be characterised by those companies where the underlying business model is viable, but the organisation needs operational change to improve its performance and ultimately offer funders, whether PE or bank, a return on their investment.
This is proof positive that turnaround and interim managers play a vital role in the turnaround funding markets. Charles Bodie, partner at PE firm Kelso Place Asset Management, which regularly puts experts in place within a company to guide the business through a turnaround, said: "We frequently take on discrete projects as a part of a restructuring process to allow the existing management team to focus on the day job. This approach, together with crucial equity funding, has a transformational effect."
It would seem to me that turnaround and interim managers can help to unlock the so called "wall of money" that collectively PE firms have to invest in UK business. It is their expertise and guidance that can bring about the operational change so crucial to a turnaround deal's success. In 2012 I hope as an industry we can help more UK businesses access the vital equity funding they need and find a way forward for them to improve performance.
Susan Moor