Today we begin a six-part series to guide you through the steps of successful distressed investing.
If you’re looking for attractive investments, chances are you’re finding it harder and harder to source accretive deals in the current landscape. The solution to your problem may lie in distressed opportunities. Distressed opportunities arise in many different situations and circumstances. Some of the more traditional situations include businesses that are underperforming, are suffering from debt maturity or have a bad capital structure. Maybe their profitability is declining, they’re going through a restructuring or they’re even in creditor protection.
While there have been recent examples of distressed business sales in Canada—particularly in the retail, mining, energy and technology industries—the Canadian market lags behind the US and European markets for those participating in the process. Canadian investors are often hesitant to enter the distressed market because of the perceived risks these deals can present, the lack of accessible information and, in most cases, assumptions about regulatory complexity.
Despite all this, we believe the Canadian distressed market is ripe for investment. And with a team of professionals experienced in distressed deals, restructuring and delivering post-deal value by your side, there’s a notable opportunity for superior returns.
Move ahead with the right insights
Before you dive into distressed investing, make sure you’re getting the right information to evaluate opportunities with confidence. The best way to successfully navigate this market is through detailed financial analysis, data analytics and a network of well-established relationships.
- Financial analysis: Make better and faster decisions with trusted and actionable financial insights. Prudent investors need to examine macro trends, analyze which industries are susceptible to downturns and find market inefficiencies based on these factors. Our proprietary distress models are based on metrics that have proven over time to be precise indicators of the events leading up to distress.
- Data analytics: Investors need to see the big picture and identify distressed opportunities that aren’t immediately apparent. Using data analytics can help you get a complete understanding of a deal, visualize the impact of your options and make you more confident in your decisions. Our proprietary analytics tool features an algorithm and statistical software that have analyzed distressed situations over a 20-year period. Those insights into the distressed market, coupled with census and industry data, help us spot trends and patterns, which in turn drive our predictive and future-looking analysis.
- Market presence: It’s not always what you know but whom you know. Having an established practice and global network on your side that knows the participants in the distress space is critical. This is where the leads materialize. Well-connected partners will also have an inventory of companies looking for investors—and they could help make the right introductions.
Now that you understand how to find a distressed company, the next step is figuring out the catalyst event that will prompt the timing of your investment. And so begins the strategy part of distressed investing, which we’ll cover in our next post.
For a look at our distressed investing capabilities, visit our website.