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Big Company Bankruptcies to Continue into 2010, Study Concludes

  • Effects set to ripple out to 2010.The Find: Thought the worst of the big bankruptcies was over? Bain & Company is predicting that the number of bankruptcies of companies "with $100 million or more in assets will approach 100 in 2010."
  • The Source: The Bain CRG Fall Default Outlook.
The Takeaway: 2008 has already seen its fair share of spectacular bankruptcies, with between 50-75 large businesses expected to fall by the end of the year. But it looks like the fireworks aren't over yet. Bain has just released a study of the forward picture based on an analysis of macroeconomic trends and predicting that the economic shockwaves will ripple into 2010.

The bottom line: "the study estimates bankruptcies next year to surge into the 95-120 range, an upward forecast," with the "retail and other consumer-cyclical sectors highest on the endangered species list." 2010 could see a further 100 big companies fall.

Sam Rovit, author of the study and managing partner for Bain CRG, concludes: "The body blows to industry supply chains will keep on coming into 2010. Because of the lag time between macroeconomic factors and defaults, our study finds that a painful business shockwave will extend further into the future than originally thought."

What does this mean for your company? If your balance sheet is strong, Bain is advising you "to rein in spending and gradually begin to acquire assets to improve their competitive position," and be wary of buying too early. "Most companies would be advised to sit on the sidelines for the time being because heavy weather is here for a while and asset values will continue to drop," says Rovit. If you're facing a weak balance sheet but have strong competitive position, think about "cutting costs, divesting non-core assets, building cash and protecting liquidity."

The Question: Is anyone brave enough to predict who will be the next to fall?

(Image of ripples by airosan, CC 2.0)

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