Majority of Gulf CEOs expect increase in ‘distressed businesses’, says survey

TDT | Manama                                                                  

The Daily Tribune – www.newsofbahrain.com

Reported by Julia Cassano  

About 89 percent of Gulf CEOs expect an increase in businesses experiencing stress in 2023–2024 and see a need for specialist intervention in critical areas including liquidity management, cost reduction, capital efficiency, and margin optimisation.

This is as per the release of the first edition of its Middle East Turnaround and Restructuring Survey for Q1 2023 by leading global professional services firm Alvarez & Marsal (A&M). The survey asked respondents to indicate whether they anticipate an increase or decrease in businesses experiencing financial distress across the GCC, together with their views on the extent of intervention by turnaround specialists.

The key findings detailed that 75 percent of respondents expect economic growth to slow or reverse, with the greatest issues expected to face businesses including the cost of capital, inflation, market volatility, weakening demand, and changes in tax and regulation.

The findings of the survey also revealed that businesses across the GCC are expected to see an increasing need to transform or restructure in a volatile market. A large majority (79 percent) of respondents see many restructurings that deal only with debt without an accompanying operational fix.

Seventy percent of those same respondents consider that an operational restructuring should indeed accompany a financial restructuring in most cases. Paul Gilbert, Managing Director and Co-head of Alvarez & Marsal in the Middle East, commented: "While a number of economies and sectors across the Middle East are bucking the trend, it is clear that respondents consider other sectors to experience further underperformance and liquidity pressure in the face of global economic headwinds."

He added that with rising interest rates and inflation, many struggling businesses are seeking short-term solutions to their debt burden. Respondents to the survey clearly agree that fixing a business’s underlying performance issues at the same time as carrying out financial restructuring is the best way to deliver a longer-term, sustainable turnaround.