Today's Wall Street Journal (subscription required) reported that turnaround firms are beefing up their staffs as a result of increasing demand for their services from hedge funds. Two of the biggest turnaround firms, Alix Partners LLC and FTI Consulting Inc., has either significantly increased its staff or has plans to in the coming year.The increase in business bankruptcies and corporate default rates has been predicted for some time, but just hasn't seem to materialize. Why? There's simply too much debt and equity available on easy terms.
I have spoken to a couple of lenders in the last 24 hours - each complained about capital markets awash in liquidity that have caused them to lose deals to other sources of debt willing to take more risk at a lower cost. One mentioned to me that the private equity sources are aggressively trying to reduce their equity investments in leveraged buyouts giving him reason to pause about pursuing those loan opportunities. Another lender mentioned he lost a deal to a competitor who was willing to fore go any collateral requirements for a company experiencing losses. There's no shortage of anecdotal evidence. All agreed that the only thing that may bring some sanity to the capital markets is a short recession with a few good loan defaults!
My advice - run your business to maximize value and don't overextend yourself. And make sure you know your lender - it's relationship that counts most when the chips are down.
If your business is undergoing a turnaround and you need help finding the right lender or telling your story the right way, read "Matchmaking for Business Loans" and give me a call.
Related Tags: Wall Street Journal, debt, equity, turnaround, private equity, business loan
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