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The January 2023 issue drew on Orion Financial Solutions' transaction advisory (TA) programme to describe the condition of Lebanese SMEs and how investment-grade preparation could reconnect them with capital. With bank funding gone and no domestic capital market to replace it, the authors argued that an independent advisory process had to perform the valuation, arranging and investment-banking role that banks had never properly provided.
The programme's diagnosis was consistent across companies: poor governance under dispersed family ownership, unresolved succession across third and fourth generations, rudimentary financial policies built on expensive overdrafts, little diversification by activity or geography, weak exports and high operating costs from deficient state infrastructure. Companies typically held solid real estate assets but had poor cash positions and no financial flexibility; multiple exchange rates had also disorganised their accounts. The TA reconstructed financial statements, produced five-year projections, an independent valuation, a full credit analysis and a governance charter, following a path from operational restructuring through strategic positioning and financial optimisation to management and board arrangements.
The issue stressed that not every engagement ends in a conventional equity or debt raise. Identified transactions ranged from capital increases, short- and long-term debt and outright sales to strategic distribution partnerships, white-labelling, bond issues, factoring and Islamic structures, supported by recapitalisation, factoring and clean energy funds and by domestic scoring.
Key findings
- SME assets long pledged as bank collateral were being released as companies repaid dollar loans at the LBP1,500 rate still applied to bank debt at the time of writing.
- Direct negotiations between owners and investors had generally failed over valuation, which the independent TA valuation was designed to resolve.
- The crisis had led a number of shareholders in productive sectors to consider selling 100% of their businesses.
- The issue positioned the TA as a precursor to domestic scoring and to a domestic bond market by establishing the credit quality of individual SMEs and sectors.
Archive: written in Jan 2023; figures and assessments reflect conditions at the time of writing.Summary of the paper; the full analysis is in the PDF.