Zombies – Can they be saved?
Over the past few weeks and months, more and more people have been asking for our views on so called Zombie companies. We first commented on these in our initial 2011 survey, followed by a second survey in 2012. I was asked again for my views on Radio 4's Today Programme. This coincides with increasing requests from political and policy leaders for our views on the subject.
The full transcript of the interview is attached as a link (interview time - 1:13:28) which I hope will be of interest.
Our views remain that the problem is wider than many commentators think. KPMG's involvement in addressing the problems of companies in this position has encompassed SMEs, larger global concerns, over indebted privately owned businesses and pension funds, to name but a few.
It is also our view that the debt holders who end up effectively owning these types of businesses are not necessarily the best agents of stimulating their re-birth. Only a few of these types of investors have the necessary time, skills and ambition to really drive growth and innovation and take the kinds of entrepreneurial risks that are required.
This unfortunately leads us as a nation to an uncomfortable fork in the road. One route is to clean up the debt overhang in the system so it can be productively invested elsewhere. The other is to prioritise and protect jobs at all costs, given the fragile state of the current recovery.
There is no easy answer and there are undoubtedly some companies that will be nursed back to health over the coming years that may not have been given the chance in a recession like that of the early 1990s. This has to be a good thing.
What it shouldn't do however is stop honest conversations about those companies that will never escape their existing liabilities and where preservation prevents employees, entrepreneurs and capital from being invested in the next Google.
I look forward to hearing your views on the subject and reflecting these in the policy debate underway.
UK Head of Restructuring