Dubai – Global professional services firm Alvarez & Marsal (A&M) has today published its bi-annual A&M Distress Alert (ADA), which shows that while corporate distress has stabilised in the two Middle East countries included in the analysis - Saudi Arabia and the United Arab Emirates - the latest data indicates an increase in the number of underperforming companies. This trend reflects an environment of weakened consumer demand both regionally and in key export markets, coupled with persistent inflation and supply chain disruptions that are increasing input costs and compressing margins.

With the impact of higher inflation on asset collateral valuations largely delaying the need for restructurings, the report anticipates more restructuring activity across the region as inflationary pressure eases and interest rates begin to reduce.

Paul Gilbert, Managing Director, and Co-Head of Alvarez & Marsal in the Middle East, said: “Despite some stabilisation in corporate distress levels, the Middle East is not immune to broader economic challenges. Persistent inflation and stubborn interest rates are putting significant pressure on corporate performance and balance sheet robustness. Companies must proactively manage their cash flows and look at all options to maximise operating performance.  Where they can see a debt crunch approaching, companies need to consider early refinancing discussions and take professional advice to support those discussions.”

Middle East outperforms European markets

The number of companies lacking performance in the Middle East has increased, reflecting the broader economic challenges. Notwithstanding this, the region is outperforming many European territories examined in the ADA. Recorded distress levels were also greater in the Benelux (10.2%), UK (9.9%), Germany (9.4%), and Nordic countries (9.2%), than the Middle East (8.9%). Similarly, a higher rate of companies in these European markets were found to be lacking performance and robustness than in the Middle East.

Mr Gilbert commented, “While the distress levels in the Middle East will be a concern for companies operating across the region, it remains notably lower than those recorded in several European markets. This indicates that, despite economic headwinds, the Middle East is demonstrating greater resilience compared to European counterparts, underscoring the relative strength and adaptability of businesses in the region, even in the face of significant economic pressures.”

The alert assesses the financial performance and balance sheet robustness of more than 8,200 companies across the Middle East and Europe.

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Methodology

A&M’s Financial and Operational Restructuring team has developed a methodology to assess performance and balance sheet robustness of European businesses, aiming to identify those that are in financial distress or may soon be heading in that direction.  

The study includes more than 8,200 listed and private companies, each with annual revenues exceeding €20 million, across 33 countries in Europe and the Middle East. These companies consistently provided data for all years from 2019 to 2023.  

The ADA index analyses 18 KPIs to create two sub-scores: the performance score, which is based on the company’s own income statement as well as related KPIs measured against its industry peers, and the robustness score, based on detailed balance sheet data.  

About Alvarez & Marsal 

Companies, investors and government entities around the world turn to Alvarez & Marsal (A&M) for leadership, action and results. Privately held since its founding in 1983, A&M is a leading global professional services firm that provides advisory, business performance improvement and turnaround management services. When conventional approaches are not enough to create transformation and drive change, clients seek our deep expertise and ability to deliver practical solutions to their unique problems.

With over 10,000 people across six continents, we deliver tangible results for corporates, boards, private equity firms, law firms and government agencies facing complex challenges. Our senior leaders, and their teams, leverage A&M’s restructuring heritage to help companies act decisively, catapult growth and accelerate results. We are experienced operators, world-class consultants, former regulators and industry authorities with a shared commitment to telling clients what’s really needed for turning change into a strategic business asset, managing risk and unlocking value at every stage of growth.

To learn more, visit: AlvarezandMarsal.com. 

CONTACT:     Seán Lawless
Hanover Communications