2008-10-06 21:15:04 -
- AlixPartners Tim Yost, +1-248-204-8689 No less than 98% of Europe's most prominent corporate-restructuring experts say the recent financial meltdown on Wall Street will have a contagion effect on both finances and companies throughout Western Europe, and 62% of that number believe the tide will hit by the end of this year. That's according to a new survey of leading
bankers, lawyers, fund managers and other experts conducted by AlixPartners LLP, the global business-advisory firm.
Adding to the less-than-sanguine outlook, 73% if those surveyed said they think the current credit crunch enveloping Europe along with most of the rest of the world will last until at least late 2009. No one polled said it would be over by the end of this year. Meantime, 54% said the liquidity crunch has permanently altered the business model for private equity in Europe--forcing things like greater equity stakes by PE firms in their portfolio companies, the need to take a new look at small- and mid-cap opportunities and, most of all, more focus on portfolio-company operations, rather than just financials. Nineteen percent of those who believe the old PE model is now broken said a greater focus on improving operations in portfolio companies is now in order.
When asked to pick which of the following five European countries is most likely to experience the greatest share of corporate restructurings in the year ahead, 44% said the United Kingdom, 18% said Spain, 17% said Germany, 7% said Italy and 5% picked France. In a similar survey by AlixPartners a year ago, Germany was seen as the most likely to experience restructurings, followed, in ranked order, by the UK, France, Spain and Italy.
When asked to tick off which of these countries would likely experience a full-blown recession the in the next 12 months, 81% checked the UK, 53% checked Germany, 51% checked France, 46% Italy and 36% Spain. Russia, Ireland and "the Nordics/Scandinavia" also received multiple write-in votes, and Iceland also received one.
In terms of individual industries likely to feel the pain, and to see the most restructuring activity in the year ahead, 54% picked retail as one of their top three choices, 32% picked construction or real estate and 37% said companies in the financial industry. Other industries mentioned in this category included automotive and airlines. Meantime, when asked to pick three heretofore healthy industries likely to see a fair amount of restructuring in the next 12 months (and to perhaps surprise people by that need), the industries named included chemicals, pharmaceuticals, travel and leisure, professional services and telecommunications.
In one bit of sunshine in the otherwise gloomy forecast, 42% of those surveyed said the coming downturn in Europe will be "like the early 1990s"--i.e., difficult, but not a catastrophe. On the other hand, though, 31% said it will be like the oil-shock-induced downturn of the 1970s, while 29% said it will be "like 1929" and 22% said it will be "unprecedented."
"We live in an increasingly interlinked world and what's happening right now on Wall Street is in all likelihood going to have a dramatic, and almost immediate, effect on Europe, as confirmed by this survey of Europe's top restructuring experts," said Stefano Aversa, co-president of AlixPartners and the executive who oversees the firm's European operations. "The professionals polled in this survey have seen many a downturn and many a financial scare, but I think it's clear that even they view the times we are all going through, globally, as unprecedented.
"In uncertain times like these, it pays to maintain a cool head and to get back to basics--whether you're a company, a private-equity firm or another kind of investor. That means focusing on creating 'headroom' in cash availability. It means improving operations, not just financials. It means searching relentlessly for synergies and efficiencies. And, perhaps most of all, it means taking a clear-eyed, unsentimental look at each and every operation and adjusting capacity to the reality of the market, while simultaneously working on new product and service offerings to sustain short-term demand and to prepare for the next cycle. Clearly, no one knows how bad this coming storm might be and certainly the global financial system is not going to be same at the end of it. But if you prepare for it now, it is a storm that can be ridden out."
The AlixPartners survey polled 59 leading bankers, lawyers, fund managers and other industry experts from throughout Europe, including experts from the UK, Germany, Italy, France, Spain, Switzerland, Sweden and the Netherlands.
About AlixPartners
AlixPartners is a leading global business advisory firm offering services across four main disciplines: operational performance improvement, financial restructuring and bankruptcy reorganization, litigation consulting and financial advisory services. The firm's expertise is in helping clients anticipate, evaluate and successfully resolve urgent, high-impact business challenges in an increasingly complex legal, regulatory and economic landscape. Drawing on the experience of more than 700 employees from 13 offices across North America, Europe and Asia, the firm commits small teams of seasoned professionals to deliver results when it really matters. For more information, visit www.alixpartners.com.
98% of Experts Surveyed Expect Contagion, Most Within 3 Months;
A Majority See Private Equity's Business Model as Permanently
Altered
