Restructuring is poetry in motion, savor the experience

The Saudi restructuring market has developed rapidly over the past five years. No longer is restructuring, whether operational or financial, viewed as a bad thing; it is considered a necessary process to be tackled proactively.

It is only natural for companies to find themselves needing to transform and restructure their businesses in response to changing market dynamics. Any such program aims to improve good companies and turn around those experiencing difficulties rather than delay the process until significant problems emerge.

We are noticing more and more large-scale restructuring projects taking place across the Kingdom, a sign that key stakeholders are acting to ensure that their companies adapt accordingly.

Over recent years, Saudi Arabia has created a more business-friendly environment for companies by increasing access to capital and proactively implementing new regulatory frameworks. For example, the new bankruptcy laws have already begun to yield positive outcomes for companies that previously would have struggled before ultimately failing.

According to the International Monetary Fund, the Kingdom’s economy is projected to grow by 7.6 percent this year, which would likely be one of the fastest growth rates in the world and outpace the US in economic growth.

Within the Gulf Cooperation Council, Saudi today is the largest economy and is going through one of the fastest transformations globally.

In 2021, the Kingdom’s economy recovered from the coronavirus-induced slowdown, with economic activity picking up momentum this year as oil prices rose. Moreover, the government is focused on improving the regulatory landscape to attract foreign investors and enhance the ease of business in the Kingdom.

As part of Vision 2030, the government aims to increase the private sector’s contribution to the gross domestic product from 40 percent to 65 percent in the coming year. In addition, the ongoing privatization program is on course to develop and diversify the economy.

The government also has an effective development strategy specifically for Riyadh, seeking to transform the city into a major global economic hub by 2030.

Companies in Saudi Arabia, however, will face various challenges during this transformative period such as understanding and deciding on strategies such as where to play and how to win.

These organizations will also have to adapt their business models to changing market dynamics such as new regulations, digitization or evolution of processes. They will also have to deal with underperformance before it becomes an existential issue.

Specifically, within the restructuring space, there is growing scrutiny on the role of the Big Four firms, where new legislation effectively ends audit firms’ ability to provide non-audit services to clients, creating a real need for independent advice.

As the Saudi bankruptcy law is starting to yield positive outcomes for stakeholders, this will encourage business leaders to seek the support of experts to assist their companies through a structured and well-governed restructuring process.

Complex problems, shifting demands and rugged business environments make today’s high stakes even more dangerous, so stakeholders must choose a transformation or restructuring partner with an operational heritage and execution focus.

Deploying senior, hands-on teams with operational mindsets provides the perfect support for companies and megaprojects as they navigate the ambitious and challenging roads ahead.

The Saudi economy will continue to change rapidly. Vision 2030 has set ambitious targets. New cities are being created. New industries are incubated, and the impact of digitalization will only keep increasing.

Several giga-projects will begin reshaping the country and its economy and act as critical economic growth drivers. Similarly, the restructuring market in the Kingdom will continue to develop and evolve. New tools and processes from across the world will increasingly be adopted. Expect more transactions, innovative financial solutions and organizational change to be implemented faster.

• Paul Gilbert, is the managing director and co-head of A&M in the Middle East.

• Rehan Arshad is the senior director, turnaround and restructuring, A&M