According to the Distressed M Study 2021 by Deloitte, market participants expect a significant increase in distressed M transactions this year. In the corresponding study, more than 2,000 consultants, financiers, CROs, insolvency administrators and investors were surveyed regarding their opinions on trends and developments in the distressed market in Germany. Of the 2,000 respondents, 83% expect an increase in distressed deals in Germany, with only around seven percent expecting fewer transactions. Compared to the previous year, the number of those who expect a significantly increasing number of distressed M activities has more than tripled from 5% to 18%.

After the eventful year 2020, expectations for the valuations of distressed transactions have almost completely reversed. 52% of the 2,000 study participants are convinced that valuations in distressed M deals will fall in the next twelve months. A full 38% expect multipliers to stagnate. In contrast, only 10% expect rising valuations in the same period. In 2019, 20% of those surveyed still considered a rising valuation in distressed M deals to be realistic. Only 29% of the respondents at that time expected falling valuations at that time.

Thomas Sittel, Partner at Deloitte, knows the reason for the increasing forecast of falling valuations: “The stock exchanges are currently at or near their historical highs. The associated valuation levels are also relatively high in historical comparison”.

The Distressed M Study 2021 assumes a longer-term increase in the number of distressed M deals than just 12 months. 35% believe that the rising trend will continue in the next twelve months. A proud 30% even expect an increase that will last longer than twelve months.

The potential targets are still being scrutinized. The main reasons for the failure of distressed M deals are seen by 71% of the participants in particular in the lack of prospects for a turnaround – 59% also see an inadequate turnaround concept as the reason for the failure of the possible transaction.

The question of how the valuation of assets can be adjusted for possible coronavirus effects is currently being discussed critically in the distressed M market. The determination of an operating result adjusted for Corona effects (“EBITDAC”) is under discussion. According to Thomas Sittel, such an adjusted result is generally accepted on the buyer side.

Success factors for distressed deals are above all comprehensive data preparation (57%) and a quick approach to investors (56%). The broad approach to investors has gained enormously in importance after the Corona year 2020 with an increase of eight percentage points.

We – the team at starkpartners – will be happy to advise you!

You can reach us by phone at 02150 7058 210, by e-mail at mergers@starkpartners.de or on the web at www.starkpartners.de

We know the challenges in such M processes and know how to master them. We look forward to your feedback!

Distressed M