European Union countries saw lower bankruptcy rates in the first half of 2017, as did Canada. US bankruptcy filings dropped 5.5% in the 12-month period ended September 30, 2017.
With equity prices booming, low interest rates and plentiful capital, all a company needs to do to fund its expansion is wait for the phone to ring. For many, it’s the best of times—unless you advise insolvent businesses.
With real global GDP forecast to expand by 2.9% in 2017, compared to an estimated 2.4% in 2016, Dun & Bradstreet economist Oana Aristide states: “Against this background, it is unsurprising that worldwide company failures are continuing to decrease.” Of the 46 countries analyzed in D&B’s 2017 Global Bankruptcy Report, 28 experienced falling bankruptcy rates relative to 2016.
According to Aristide, most European Union countries saw lower bankruptcy rates in the first half of 2017, as did Canada. She observed a slight increase in US rates through June, but, according to federal court records, US business bankruptcy filings dropped 5.5% in the 12-month period ended September 30, 2017.
But falling bankruptcies may not bode well for those who make a living advising firms considering court protections. British restructuring and insolvency consultancy Begbies Traynor, for example, recently created a shell for its core practice while diversifying into real-estate advisory.
Not all competitors are following suit. “We are doing the opposite,” says FTI Consulting’s Carlyn Taylor. “Restructuring is pulling resources from other parts of the firm.”
“There’s no question that, at the lower end of the market, there’s been compression,” says another restructuring and insolvency adviser who spoke on background. “We don’t hire and fire based on trends.”
The adviser notes that bankruptcy isn’t the only option for struggling businesses. “While the overall number of restructurings and insolvencies is down,” he says, “there’s a much higher proportion liquidating or [initiating] quick sales, rather than seeking court solutions.”
Advisers contacted for this article see retail, healthcare and energy as sectors with the greatest current demand.
According to data provided by the American Bankruptcy Institute, commercial bankruptcy filings per day bottomed out in 2015 and have been slowly rising since. Taylor sees similar inflection points in Europe, Latin America and Asia.