'Middle East should brace itself for restructuring wave'

As the impact of the Covid-19-induced economic crisis manifests itself, Matthew Wilde, a Managing Director at AlixPartners in the Middle East, anticipates a sea of firms will be forced to restructure their operations with survival and future-proofing in mind.

Wilde was brought on board to lead AlixPartners’ Turnaround & Restructuring team in the region just earlier this month, drawing on more than two decades of experience in the corporate restructuring business. Judging by his experience, he anticipates that the Middle East will see widespread restructuring efforts in the coming months.

“I think it’s inevitable that there’s going to be some big changes, and some of that will be in the form of consolidation, some in the form of closures or even failures,” said Wilde in an interview with Arab News.

On the other hand, Wilde pointed out that restructuring is not only driven by financial strife, but might also be an attempt to reposition a business to meet new market conditions. The sector in which a business operates has a big part to play in the motivation behind its restructuring efforts.

“In some sectors, things are already pretty bad. This is going to go in stages, and we’re still handling the immediate lockdown stages. We’ll emerge at different paces in different sectors and the challenges will change over time. I don’t think of it as a new normal, but rather a succession of phases,” said Wilde.Some sectors, for instance, have been directly hit by the crisis, and will likely take years to recover. The travel, tourism and aviation sectors fall into this subset, where restructuring is expected to be driven by corporate failures. Others have had a tough time during lockdown, but will gradually regain momentum as economies reopen. 

In this subset, Wilde predicts that restructuring efforts might be the result of repositioning. For instance, a number of businesses will want to move their product and service offerings online to match shifts in consumer behaviour.

The third category is those sectors that are not affected as much by the lockdown as they are by the economic recession. Within this subset, sectors such as healthcare that were already going strong before the crisis will look to “hold and hope,” according to Wilde.

Others such as construction or luxury goods that were already on shaky ground before Covid-19 will most likely be forced into action. Some businesses might however not make it out of the crisis at all.

“The strategy responses needed will shift depending on how people perceive the cause of their particular impact,” said Wilde, although he also highlighted that no plans can be made with absolute certainty. “No one knows what the outcome will be so we are recommending planning for multiple scenarios.”

One opportunity that exists for many businesses in the region is the newly relaxed stance being taken by banks across the Middle East, under advisement from governments in the region. “My biggest message to the business leaders out there would be: Don’t squander that window of opportunity to proactively engage with lenders now,” he said.