78% of turnaround executives say capital is the biggest challenge for businesses facing a turnaround today, according to AlixPartners survey

11 July 2023

Financing—which was fifth on the list of challenges last year—has risen to the top and will drive distress and restructuring activity through 2023 and beyond.

NEW YORK (July 11, 2023) – Global consulting firm AlixPartners today announced the findings of its 18th Annual Turnaround and Transformation Survey, which reveal that the world’s leading turnaround executives see a prolonged and intensifying period of restructuring on the horizon. Survey respondents said the pain will be particularly acute in the commercial real estate, retail, and financial services industries, with availability and cost of capital being the top factors driving distress. Sufficient liquidity/capital (78%), management’s flexibility & agility (54%), and cost reductions (53%) are the most common restructuring challenges.

According to survey respondents:

  • 78% said that obtaining sufficient liquidity/capital is the most common challenge confronting a company facing a turnaround or transition.
  • 70% believe their region is in a recession or expect it to happen within the next 12 months.
  • 93% said the cost of capital has increased in the past 12 months.
  • 85% think financial/credit terms have become more restrictive.
  • 78% agreed that recent banking failures will further limit capital availability.
  • 34% indicated that Commercial Real Estate is most likely to face distress in 2023 globally, followed by retail (18%) and Financial Services (11%).
  • 77% said that the M&A transactions related to distressed assets will increase; 12% think that it will reach a new high

Persistent pain in financing markets

As one macroeconomic challenge recedes, another rages on. In 2022, supply chains were the top factor driving distress. This has been driven down to fifth position, replaced by the availability or cost of capital as the primary factor. The seemingly abrupt end of the era free money caused by the one-two punch of higher inflation and rising interest rates is taking its toll. The businesses that are highly levered and subject to upcoming refinancing will be facing into significant financial headwinds.

The availability of capital has clearly and severely contracted since last year’s survey. Two-thirds of survey respondents say it has decreased in relation to the previous year, versus 44% in 2022. The restrictiveness of credit terms has greatly exacerbated, too. Already high on the watch-list in 2022, when 52% of respondents said terms had tightened, 85% of experts noted this trend in this year’s study. Furthermore, the ability for troubled companies to “kick the can” through amend and extend debt agreements is becoming more difficult. 90% of respondents believe these agreements are temporary solutions that do not resolve the fundamental business issues.

Commercial Real Estate and Retail

Every industry, regardless of who is in the headlines, is experiencing the impact of inflation-driven rate increases to some degree. Commercial Real Estate (CRE), however, is the standout industry expected to face distress in 2023, ranked first by 34% of our respondents, close to double that of Retail in second place (18%). CRE is facing multifaceted pressures, with building ownership shifting from developers and investors to lenders because of high leverage, further compounded by increased costs, and the rapid emergence of hybrid work, which is leading to an increase in commercial property vacancies. Twelve months ago, just 11% of survey respondents anticipated distress on the horizon for this industry. Retail’s reliance on consumers is especially susceptible to continued high inflation having major downstream impacts on disposable income, which continues to shrink and is forcing consumers to tap into savings and increase debt levels.

Joff Mitchell, global co-lead of the firm’s Turnaround & Restructuring Services practice, said:  

“We are already in a very busy restructuring market, and I expect this level of activity to continue at least through the second half of 2023. While interest rates may be close to peaking, we are still two or three years away from seeing any significant reduction. In addition to this higher cost of borrowing, I anticipate that credit standards and availability will remain more restrictive.

“To succeed in this new era of more expensive and restrictive borrowing and increased uncertainty around operating expenses, businesses must build appropriate scenario plans to mitigate the challenges and identify opportunities, and they need to think differently about how they finance and operate themselves,” he added.

Jim Mesterharm, global co-lead of the firm’s Turnaround & Restructuring Services practice, said:

“The distress that we see ahead won’t be an onslaught like 2008 or during the worst of the pandemic, but more a steady drumbeat of increased insolvencies that governmental policymakers and treasury departments won’t be able to solve in the way they have done historically. Leaders must get out ahead of situations and fully understand the dynamics at play. Credit metrics must improve, requiring more steps to be taken to extend your runway, improve liquidity, tighten working capital, and refine capital plans.”


Research for the 18th Annual Turnaround and Transformation survey was conducted in May 2023. Respondents comprised 700 lawyers, investment bankers, lenders, financial advisors, and other industry executives involved in corporate workouts representing more than 20 major industries across the Americas, Europe, Middle East and Africa, and Asia.

For more information about the survey, please click here.

About AlixPartners

AlixPartners is a results-driven global consulting firm that specializes in helping businesses successfully address their most complex and critical challenges. Our clients include companies, corporate boards, law firms, investment banks, private equity firms, and others. Founded in 1981, AlixPartners is headquartered in New York and has offices in more than 20 cities around the world. For more information, visit www.alixpartners.com.