Corporate restructuring activity picked up during the last recession, although many companies are also going through the process today. Timothy Ross, the managing partner for Bennett Jones law firm in Dubai, discusses what is changing as the global economy continues to look uncertain.
Have you found more companies restructuring these days, or have the numbers levelled off?
It's certainly not cooling down. We're working with a number of companies and their creditors and other stakeholders to help them proceed through the restructuring exercise. Every indication that we've seen suggests there are a lot more situations out there that will require attention, and we expect this to continue for some time.
Which industry is restructuring the most these days?
Those that are either directly in, or have some exposure to, real estate, construction or development. The market has been unfavourable for real estate in Dubai, and also in the broader region for some time. A lot of people are sitting around hoping that market, in particular, will recover, and in our experience that is generally not a good idea. The better approach is to deal more directly with the issues at hand and not hope that circumstances will miraculously change.
Are there common issues affecting all companies?
Yes. Restructuring is really a process of working with financially distressed companies to, ideally, help them refocus their business and transition to a new capital structure. In the best cases, it's the phoenix rising from the ashes. I think over the last few years we've seen more ashes than phoenixes.
How long can the restructuring process take?
Some of the large corporate restructurings in the region, you'll see they're stretching on for years. A well coordinated process can be completed in as little as three to six months, and smaller situations can be handled much more quickly.
When it comes to restructuring, does bad business for others mean good business for you?
It's true that in terms of the volume of work that we're seeing there is a lot on the restructuring and dispute side. There is also a healthy amount of mergers and acquisitions, and general corporate commercial work.
Based on what you've seen, how can companies avoid having to restructure?
I'm a lawyer and not a business consultant, but companies tend to get into trouble when they make aggressive assumptions or borrow too much money and things don't work out the way they had hoped. So good planning is the best way to avoid getting in trouble. Another very important thing is good communications … and actively engage with all your stakeholders even if it's not good news. If a company is finding difficulties they should avoid the natural tendency to avoid the issue and hope they can skate on the side. You can often nip these things in the bud.