Alternative Investment

2023 Special Situations Investor Survey

A key takeaway from our inaugural Special Situations Investor Survey from 12 months ago was that almost 90% of respondents expected Special Situations M&A (“SSM&A”) activity to increase over the course of 2022. Despite a gradual pickup in activity in the second half of the year and some notable transactions, the wave of opportunities that had been predicted to come to market since the onset of the pandemic, is still yet to materialise. As we look forward into 2023, the consensus is that restructuring activity is set to accelerate as companies face down, inter alia, high inflation, record levels of debt, lower real wage growth and higher interest rates. This should lead to an improvement in both the number and quality of special situations investment opportunities brought to market this year.

This is according to our 2023 Special Situations Investor Survey, which aggregate the views of UK-based investors focused primarily on alternative investments in the lower to upper mid-market, with a typical equity cheque size ranging from £10 million to £100 million per transaction. Our findings delve into the outlook for distressed deal activity for the year ahead, with insights including:

  • The majority of investors (65%) saw an increase in special situations investment opportunities in 2022, with this pickup in activity coming through in the second half of the year.
  • Despite this increase, the number of transactions completed was below expectations, with the quality and/or size of the opportunities commonly cited as the reasons for not pursuing or closing transactions.
  • The most active sectors in 2022 were retail (22%), consumer goods (19%), automotive (13%) and industrials (10%). Investors expect this theme to continue in 2023 given the specific challenges faced by these industries.
  • 80% of respondents expect to deploy more capital in 2023 than they did in 2022, given their expectation that both the quality and quantum of special situations investment opportunities will rise this year.
  • Compared to accelerated M&A (“AMA”) opportunities, the corporate carve-out market was a more fruitful hunting ground for special situations investors in 2022. The expected rise in AMA processes in 2023 suggests this trend could reverse in 2023.

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