Distressed M&A: Not for the Faint of Heart

Learn how AlixPartners's Will Bundy has excelled in a career he loves, how M&A has shifted, and the future of the distressed marketplace.

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Managing editor Olivia Berkman interviewed Will Bundy, a Director at AlixPartners with nearly 20 years of experience in M&A transactions and organizational restructurings, as part of FEI’s “How I Got Here, Where I’m Going” series to learn how he’s excelled in a career he loves, how M&A has shifted, and the future of the distressed marketplace.

Below is an excerpt of the discussion:

FEI Daily: Will, you have years and years of experience with M&A transactions and carve-outs, etc. How have you seen the field change over the last few years and especially the last year, since COVID?

Will Bundy: Yeah. So, let tell me talk about how M&A has shifted, and then I'll talk about more focused on the market itself. M&A used to be much more manual, right? You had to actually put together rosters, put together the financials. But now, a lot of that is automated, streamlined with basically off-the-shelf solutions, which is great. It reduces a lot of the manual labor and it allows a lot more of the value-added services that you're really being paid for. And I just think that that trend will obviously continue.

The other thing that is also influencing the market now is the amount of data that's out there on companies, right? Before, you'd have to always go to expert networks to get insights. Now, you can actually go and just do web scrapes in different areas in order to gain a significant amount of insight on targets, on what's going on in the marketplace, on consumer sentiment, employee sentiment, everything. So, I think that will continue to progress. And I think you're going to see a lot, even when you think about a lot of these companies that you're able to gain insight on what used to be a cloistered environment. Some of the insights that they have are absolutely amazing. So, I think that we'll continue to see that occurring.

On the actual COVID area, how the world has been impacted by COVID, obviously, March through July was, the whole world fell into chaos. We all did it collectively. I had a conversation with one of my clients. He was like, ‘Well, I had a 90% revenue variance month-over-month. What the heck am I going to do?’ There were drastic measures that had to be taken, in order to safeguard the company, and safeguard investments. I think that funds now are starting to get to a point of some element of stability with their investments, with the portfolio companies that they have.

So now, the question is where to? We've gotten past the major crisis. You've hit stability. Now there are two paths. The first one is, are you healthy enough to really capitalize on the situation? Or the other element is, do you still have to worry, batten down the hatches, and worry about your long term viability? Obviously, time will tell, and everyone has to make their own decisions in both of those areas. But what I will say is, there's a lot of indication in the market that there's a significant opportunity for growth, inorganic growth. There was one fund, the head of North Carolina's private equity state employee fund, the head of their private equity investing that basically said, ‘Listen, there's up to about a three-year runway, where funds with the ability to handle distressed situations will likely have an advantage.’

There does appear to be an uptick, at least from what we're seeing in the distressed marketplace. You're obviously hearing about a lot more bankruptcies, but there's also potential for additional asset sales associated with those. So more time will tell, right? But there does appear to be an uptick that we can take advantage of.

But what you're also starting to see, what's amazing about that marketplace, you think about liquidity in the market and how quickly capital can flow. Amazingly, private equity doesn't make up that big of a portion of what you would actually see in the distressed marketplace. The interesting part is the distressed multiples are actually really low, on an enterprise EBITDA basis, right? You're typically talking somewhere in that three and a half to 5.5X range. Typical nominal average is about 4.5 to 4.9X. So, that's actually a pretty good opportunity for those savvy enough to navigate the transactional complexities, as well as the operational complexities associated with them, to get a pretty stable rate of return.

Obviously the marquee example for distress investing is Apollo. They returned 5.5X on a dollar. I think they did it in about two or three years, maybe four years? Something like that. It was absolutely insane. IRRs through the roof. Obviously, everyone had a very good Christmas that year, or good holidays.

FEI Daily: How did you really identify this niche? And how do you suggest other people find their niche?

Bundy: Universities and other areas where you learn are some of the best places to pick up these areas. So, how I found out about AlixPartners, and how I found out about this distressed area or a turnaround area, right, it was just during the distressed investing class. I took that when I was doing my MBA. It immediately piqued my curiosity. If you're somebody that likes a challenge, and you're the type of person that likes to get thrown into the deep end of the pool, and then swim every single time, I can tell you and regale you with cases of being thrown into a Fortune X company, with a project 10 months behind schedule, they said, ‘Yeah, guess what? It needs to be done in four months. Just tell us what need,’ and you'd have to go and be able to deliver.

FEI Daily: And you loved that challenge? That doesn't scare you?

Bundy: Oh, it's fun. You don't know how far you can go until you push yourself there, right? And if you're continuing to be successful, and you establish yourself with a track record of being able to do that, it's a very impressive thing to be able to do. This isn't for everyone. It's not for the faint of heart. As a matter of fact, in part of the AlixPartner's screening process, we do have some elements of psychological testing, to make sure that you can actually weather the storms that you will be going into. For those that have the stomach, and want to really be challenged, this is definitely an area to pursue.

How else can you find it? I would say, your mentor network. I think some of the best learning that I ever had in my MBA was actually from my classmates. It's also just talking to them about their life experiences. Getting an understanding of what else is out there, because once you've found that aperture, and the ability to explore more, you'll find that niche that's right for you.


“How I Got Here, Where I’m Going” is a live, online discussion with people in and around the finance suite about the choices they’ve made so far, their thoughts on the changing workplace, and what they hope to focus on (and avoid) as they climb the leadership ladder. To register for the next discussion, visit FEI’s events page.