(Bloomberg) -- US advisory firm Alvarez & Marsal Inc. plans to expand its Australian headcount by more than half amid expectations that rising interest rates and subdued economic growth will drive more companies into financial difficulties.
“We know with interest rate rises, there’s probably going to be stress,” said David Willis, a managing director with A&M’s Global Transaction Advisory Group, in an interview in Sydney. “We know that the banks don’t necessarily want to deal in receivership and they’d prefer to see someone in the work-out business.”
A&M is seeking to employ 500 people across three business lines - financial due diligence, performance improvement and tax - by the middle of 2025, up 55% from its current size.
The decision to establish a larger Australian presence has been driven by client demand and an opportunity to grow in a market dominated by the big accounting firms and management consultants such as McKinsey, Bain Consultants Ltd. and Boston Consulting Group Inc., said Willis.
The Reserve Bank of Australia last week held borrowing costs at a 12-year high as businesses are caught in a squeeze of elevated prices and high borrowing costs.
A&M is optimistic about the deal market, where private equity firm KKR & Co. expects more activity into year-end. While sponsors have had to hold onto assets for longer as deal-making languished, A&M forecasts a growing pipeline of companies that need advice to improve operational performance, ahead of a sale.
“We see that strategy of exiting in 2025 is going be big,” said Igor Sadimenko, a managing director based in Brisbane. Firms will need assets “back on a growth level to actually exit the business and make it attractive for someone to buy it.”
A&M has taken on some of the biggest corporate blow-ups in recent history, including Lehman Brothers Holdings Inc., Arthur Andersen LLP and FTX. A&M representatives are also currently liquidators for China Evergrande Group, the world’s most indebted property developer.
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