The Strategic Merger (Distressed M&A)
Sector: Construction | Region: Southeast Asia | Size: >600 Employees
The Challenge: A prominent Tier-1 construction firm in Southeast Asia, employing over 600 staff, faced imminent insolvency. Despite a strong order book, the company suffered from severe liquidity gaps caused by low-margin contracts, escalating material costs and late payments. The debt burden had become unsustainable, and traditional refinancing routes were closed due to the company’s deteriorating credit rating. A chaotic bankruptcy would have resulted in the immediate loss of 600+ jobs and the stalling of nationwide recognized prestigeous projects.
Our Solution: We assessed the final survival options. Upon analysis, it became clear that a standalone turnaround was not feasible due to the sheer scale of the immediate cash requirement. We shifted strategy to a “Distressed M&A” (Mergers & Acquisitions) approach. We identified that the company’s largest client – a major regional infrastructure developer – had the most to lose from a collapse. A halt in their projects would trigger massive reputational damage for the client.
Execution:
- Rapid Due Diligence: We facilitated an accelerated due diligence process, opening the books to the client after strategic alignment.
- Negotiation: We structured a deal where the client acquired the construction firm for a nominal sum but assumed specific key liabilities and guaranteed the completion of ongoing projects.
- Operational Integration: We managed the transition, ensuring that critical project teams remained intact while redundant administrative layers were streamlined.
The Outcome: The company was successfully sold to its largest customer. The acquisition preserved about 70% of the jobs and ensured 100% of the projects were delivered. The construction firm now operates as the in-house construction arm of the developer, free from external debt pressures, turning a potential large scale disaster into a strategic vertical integration.