Investors offer new faster approach to rescuing distressed businesses

KPMG has recently reported a change in approach to helping distressed businesses. Over the past year specialist turnaround investors have injected nearly £1 billion into struggling businesses to help them stay solvent.

This method involves investors parachuting into troubled businesses while still solvent to help turn them around before they become at risk of being placed into administration or being liquidated.

There are about 60 specialist turnaround investors operating in the UK, most of which are seeing more opportunities than a year ago. Most of the distressed funds were created by small groups of high-net-worth individuals with experience in restructuring businesses. About £940 million has been pumped into 73 deals over the past 12 months, KPMG reported.

Will Wright, a restructuring director at KPMG said, “Historically, distressed investors acquired companies out of administration to salvage what remained. While the traditional model still exists, we have seen small investors in the UK looking to step into businesses while they are still solvent.”

Mr Wright continued to explain that, “this change in approach is driven by a need to step into a distressed situation before it unravels into insolvency and precious value is destroyed.”

This new method bypasses the delays caused by the due diligence and committee decision-making processes that are features of the usual private equity investment model, and so is much faster and more effective.

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