Middle East Corporate Distress Stabilises But Performance Lags, Finds Alvarez & Marsal

Corporate distress in Saudi Arabia and the United Arab Emirates has stabilised, but the number of underperforming companies has increased, according to the latest Distress Alert (ADA) report from global professional services firm Alvarez & Marsal (A&M). The trend is attributed to weakened consumer demand regionally and in key export markets, along with persistent inflation and supply chain disruptions impacting input costs and compressing margins.

The report anticipates more restructuring activity across the region as inflationary pressures ease and interest rates begin to fall, noting that the impact of higher inflation on asset collateral has largely delayed the need for such measures. Paul Gilbert, Managing Director and Co-Head of Alvarez & Marsal in the Middle East, advised companies to proactively manage cash flows and explore all options to maximise operating performance, urging those facing potential debt crises to consider early refinancing discussions.

Despite the rise in underperforming companies, the Middle East region showed greater resilience compared to several European markets. The ADA report found distress levels in the Middle East at 8.9%, lower than in the Benelux countries (10.2%), the UK (9.9%), and Germany (9.4%). Gilbert highlighted this relative strength, indicating adaptability of businesses in the region.

The alert assessed the financial performance and balance sheet robustness of over 8,200 companies across the Middle East and Europe. Alvarez & Marsal provides advisory, business performance improvement, and turnaround management services to clients worldwide.