New Zealand

Details

  • Service: Advisory, Restructuring & Insolvency, Transaction Services, Transactions & Restructuring
  • Type: Video
  • Date: 6/04/2009
  • Length: 3.00 Minutes

Growth in uncertain times 

Text version:

Simon Collins: People have become used to 10 years of uninterrupted growth and good times. And many boards have not been ready for the speed and extent of the downturn. My fear is that they’re not now going to be ready for the speed and possible extent of the upturn.

If you go back to the last downturn, then it’s pretty much fair to say that capital came from the public equity markets, debt came from banks.

If you look at the world now, a great deal of the capital is concentrated in the hands of sovereign wealth funds, outside of the Western economies and really, for future sources of capital, many companies have got to look to those sovereign wealth funds and they’ve got to look east and they’ve got to look south for new sources of capital, as well as looking for those areas to provide markets for their goods and services.

When you’re in survival mode you say ok, what do I do to hit those markets and actually you don’t have a lot of money for capex, you don’t have a lot of money for acquisitions but there are ways that companies can still look to a growth agenda.

For example, joint ventures with other companies to share capex and risk. Asset swaps with other companies, to exchange businesses and assets, even though there isn’t the cash to fuel transactions.

Infrastructure’s got to be on the top of the list of a lot of companies’ aims at the moment. Whether it’s in the U.S. with crumbling infrastructure being replaced, whether it’s in the developing world with new infrastructure, there’s massive spending on schools, bridges, hospitals, roads, airports and that’s providing very real, very current opportunities.

Elsewhere there are opportunities for companies to look at their sectors and to say ok, we’ve got weakened competition, we’ve got fragmented competition, there’s a chance to do something predatory and to grow, let’s get out there and be the lions in our sector, not the zebras, and acquire now.

History is littered with examples of counter-intuitive behavior from companies who use downturns, use recessions to actually plan what the future was going to be and went aggressively out to meet it.

You’ve got to be brave at the moment haven’t you? I mean its counter intuitive to think you — the guy in the boardroom — is going to say actually I’m excited, I want to go somewhere new, somewhere different and I think there’s a balance, I think companies that are reckless are going to hit rocks pretty quickly.

But companies who ignore growth, who ignore where the new markets are going to be, could find that actually recession is just the beginning of their trouble not the end.

Global Head of Transactions and Restructuring Group, Simon Collins, gives his view on the issues surrounding growth, reminding us that opportunities for growth do exist and that more will present themselves to well prepared companies when the cycle turns upwards once more.

 

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