As the insolvency market shifts in favour of restructuring work, firms are having to adapt in order to secure work. Nick Edwards, head of restructuring services at Deloitte UK, talks to Insolvency News about how Deloitte Restructuring is prepared to tackle the changes
Head of restructuring
It’s not just the mid-tier and boutique firms that need to react to a changing marketplace. Global accountancy firm Deloitte is also aware of the need to adapt its practices to reflect the state of fluctuation in a shifting market.
“The ‘in’ word at Deloitte is agility,” says Nick Edwards, national head of restructuring services at Deloitte UK.
“The skills we have can be adapted for different situations and circumstances for clients wherever they may come from. That’s a learning and development point for people from partner downwards, as often we have to think about how we work with clients who don’t have the skills that a bank or insolvency practitioner would.”
The global network of Deloitte firms employs a total of over 200,000 people worldwide; the UK arm of the business accounts for approximately 7% of that figure, with 30 UK-based restructuring partners.
The Deloitte restructuring team has since seen steady growth since the initial credit crunch of 2008, plateauing in 2011 before a spike of high profile retail insolvencies last year – including HMV, Comet, and Blockbuster.
Research carried out by Deloitte for its UK Restructuring Outlook 2014 report found that a majority of key restructuring lenders expect to see a dip in the levels of restructuring work in 2014, something that doesn’t come as a surprise to Edwards.
“We are seeing a quietening down in the market; whether that is through the number of insolvency appointments or the number of business reviews, the market has slowed down in line with expectations”, says Edwards. “I still believe there won’t be the same kick as there has been at the end of previous recessions in terms of a peak in insolvencies, but there will likely be a pick-up in due course.”
Without that “kick”, the issue for firms will be how to best deploy the staff and resources available to them, and where the work is coming from.
“We’re seeing that interesting change of looking to maintain the existing business but then spreading out to work with a broader range of clients, for example, the alternative lenders” says Edwards. He also points to the European AQR (Asset Quality Review) test being carried out across 120 European banks prior to the European Central Bank assuming regulatory power in November as an opportunity for Deloitte Restructuring.
“That is an area where I would see opportunities for us to do work over the next 6-12 months, supporting our capital markets and, in Europe, bringing our skills to distress situations. For me, that also gives a good lead-in as we build our European presence.”
However, that doesn’t mean Deloitte Restructuring will be neglecting the corporate UK market. Edwards believes there is much work still to be done on the corporate side, either within the mid-market or upper-tier, whether that is financial or operational restructuring through to operational issues such as supply chain management.
The issue then becomes about market share and how to not only win it, but how to hold on to it. Edwards maintains that the flexibility of the Deloitte Restructuring team will not only allow the company to continue within its existing markets, but also break new ground elsewhere.
“You really have to work with that flexibility to win in new areas where previously we weren’t even getting there,” he says. “There are opportunities out there, like the Europe AQR, where we need to be going broader into Europe.”
Edwards knows that by its very nature, restructuring is hardly a repeat business, but he feels the Deloitte team is capable of continuing to win work. “As a result, you’ve got to be out there in the market to win market share, as opposed to when it’s busier, by its nature there is more of a flow the other way,” he asserts.
“You’ve got to seek the opportunities”
Offices: Belfast, Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, London, Manchester, Nottingham, Reading
Total Staff: 342
Insolvency Practitioners: 27
Administrations appointed to in 2013: 144
Administrations appointed to in 2012: 142
Some 76% of respondents said that they expect to see no change (24%) or a fall in levels of restructuring activity (52%) throughout 2014.
Factors behind the expected decline in restructuring activity include firm indicators of growth in the UK economy, reduced restructuring team sizes, and the progress of sales of non-core assets in 2013.
Just 24% of respondents expected to see a rise in restructuring work during 2014, attributing this to further non-core asset portfolio sales and the progressing restructuring on companies previously involved in swap mis-selling claims.
40% of respondents said they saw the volume of restructuring cases decrease year-on-year, despite having previously expected a rise in activity.
In 2012, 52% of report respondents expected an increase in the volume of cases coming into restructuring, but only 30% said they had seen an actual rise in cases during 2013.