Navigating Special Situations

Despite the significant turmoil in markets and the stress that many businesses find themselves in, there is significant capital available from a variety of sources to help businesses survive, stabilise through these challenging times and indeed thrive in the long term.

Special Situations financiers provide capital to businesses that are in some form of stress or distress with the expectation of realising a significant return on their investment once the special situation is resolved.

The good news is that investors, lenders and acquirers are abundant and active in the Australian market and there are vast amounts of capital waiting to be deployed.

Stressed businesses can maximise their potential to secure capital on the best possible terms by ensuring they are deal ready. This involves:

• Ensuring that all appropriate steps have been taken to restructure the operations of the business or a clearly executable plan is in place
• A robust business plan has been prepared and is supported by a detailed financial model
• Having a clear strategy to refinance any debt provided once net cash flows have returned to a stable and sustainable position
• All significant shareholders being committed to seeing the business through the turnaround and growth plan
• A strong and committed management team supported by a motivated and engaged wider team are fundamental for any business’ success.

We have also seen a significant increase in well capitalised companies seeking opportunities to acquire competitors. While there is certainly a degree of opportunism concerning this, it does present an opportunity for business owners to divest non-core operations or indeed the entire business. A well-executed sale process that clearly articulates the value drivers and risk mitigants and maximises competitive tension will ensure the best possible outcome for vendors with respect to both price and residual risk.

PKF’s Special Situations Advisory team can assist business owners and leaders to navigate the pressure that has been placed on their business so that it can survive, stabilise and thrive. This team is led by Brad Tonks, Alan Stevenson and myself. We each have a long and successful track record of helping businesses navigate turbulent waters through restructuring, recapitalising or divestments.

PKF Capital has recently been established as an initiative of PKF Sydney, Newcastle, Melbourne and Brisbane offices to efficiently connect businesses with suitable capital providers. We can connect a wide range of businesses with investors and lenders that have suitable mandates to support the growth of the business over the long term.

Despite the challenges that most businesses are now faced with, we have been reassured by the perseverance and commitment of business leaders to stay the course and steer their businesses through these troubled waters as well as the confidence that capital providers have in supporting businesses that have charted a clear course to sustainability and prosperity.