Business rescue becoming a buyer’s market

South Africa’s distressed business market may look bleak at first glance, but for investors it is becoming a growing source of underpriced opportunities.

That is according to Park Village Auctions (PVA) director Roy Lazarus, who says sophisticated investors should pay closer attention before the rest of the market catches on.

Higher interest rates, weak growth and logistics pressures have pushed an increasing number of companies into financial distress in recent years. Instead of going into liquidation, more of these businesses are entering formal business rescue, which buys time to stabilise operations, restructure finances, and (where necessary) sell assets or the operating business to new owners.

That process is creating a steady stream of opportunities. These are sales as going concerns with staff and productive capacity still in place. They sit in a space between traditional M&A and fire‑sale auctions: distressed, but still operational.

“Most concerns undergoing business rescue are not failed ideas,” says Lazarus. “They are fundamentally viable businesses that have run into a funding wall or a structural shock. What they need is fresh capital and a different way of doing things, and that combination can turn them around.”

PVA’s current pipeline shows what this looks like. Daybreak Foods in the poultry sector and Botswana’s Mupane Gold Mine are among the businesses in its business rescue portfolio. These are sizeable operations and familiar brands coming to market through structured rescue processes, not quiet closures or scrap‑only break‑ups. For buyers, that means going-concern businesses, often with national footprints, are becoming accessible through channels many still associate only with distressed assets.

The structure of business rescue is part of the appeal. It is legally supervised, and practitioners must present a plan to creditors before sales can proceed. That gives investors defined steps, a clearer flow of information and less guesswork than informal workouts. When sales happen via auction, practitioners also get competitive bidding and a transparent record, which is why firms like PVA are being drawn into more high‑profile matters.

Price is the other part of the appeal. Distressed transactions, both locally and abroad, tend to sell below replacement cost because sellers are running out of time and cash. In South Africa’s current environment – where building new industrial capacity is expensive and slow – buying an existing plant or operation at a discount changes the economics for investors. Instead of funding years of capital expenditure and approvals, they can acquire equipment, people and market access in a single step.

Crucially, this is not confined to one niche. PVA’s business rescue instructions span textile mills, food producers, electronics groups, engineering operations and mining assets. That range allows investors to use business rescue as a source of acquisition, sector entry or diversification opportunities, all through a channel that much of the market still treats as an afterthought.

The impact extends beyond investors. Studies of South Africa’s business rescue regime show that successful rescues keep in the system jobs and enterprise value that would otherwise disappear in liquidation. That helps support growth, preserve part of the tax base, and soften the blow for towns and cities built around a handful of large employers. In an economy marked by high unemployment and low growth, the difference between “sold and trading” and “shut for good” is very real.

“People sometimes see this as vulture investing,” says Lazarus. “From where I sit, if no-one steps up to buy, the doors close and everyone loses – workers, suppliers, creditors and the tax base. When an investor takes on a distressed business and turns it around, that is a win for more than just the buyer.”

Business rescue still lags liquidation, and many buyers still view auctions as places to acquire loose assets rather than entire operating concerns. Yet the volume and profile of cases moving through PVA’s business rescue division suggest that view is outdated. For those willing to look beyond the stigma of distress, business rescue is becoming a credible route to acquisition, turnaround and long‑term value creation.