By Lou Sokolovskiy

Global dealmaking isn’t what it used to be. Worldwide M&A activity has slowed for two straight years, with volumes down 9% in the first half of 2025 after a bruising 25% drop in early 2024. Big-ticket buyouts still happen, but they’re rarer, slower, and harder to close.

What’s filling the gap? Distressed deals.

Tom Goldblatt, who has spent decades in this corner of the market, says the environment is shifting. “There’s a lot of reasons that distressed deals should be on everybody’s checklist of things to be looking at, particularly now when there’s been fewer deals. And I think we might be heading into a period of a lot more distressed deal flow.” Goldblatt is the founder and managing director of Ravinia Capital LLC, a boutique investment banking firm based in Chicago.

Why Investors Are Turning to Distress

The appeal is direct. “First of all, there’s an access to hidden gems. These are companies that might never have hit the market or be available through typical channels,” he explained. “In normal times, they wouldn’t be available. And suddenly, they are available. And they’re deals that you can definitely complete.” 

Perhaps the biggest advantage is risk reduction. “You get to buy it liability-free. You can buy it debt-free, but also if there’s hidden liabilities, you don’t really need to worry about them because overall, these liabilities will go away.”

Distressed sales also create opportunities to reshape the business. “In a restructuring, particularly if it’s a bankruptcy, there’s opportunities often to really improve the company and renegotiate key customer, vendor, or lease agreements that might have been a drag on the company. And you can accept or reject contracts to make the company a lot more profitable,” Goldblatt says.

And unlike traditional M&A that drags on for months, these deals close quickly. “A distressed deal is going to be on a tight timeline. It’s going to move quickly. There’s going to be a close, and you’re in and out in a very short time, so that’s much more effective,” Goldblatt says.

How to Play the Game

The rules are different. “I always analogize to people that play poker,” he said. “And when somebody calls a new game that you haven’t played, you’re at a disadvantage. Those that really know the game are an advantage.”

His advice: start with expertise. “The first thing I would recommend is to bring the right team. And that, he explained, includes experienced bankruptcy attorneys, reliable lenders and strategic advisors.

Speed also matters. “These deals really move fast. People aren’t used to these timetables. When you get used to it, it’s fun because there’s a lot of action. You have a lot of advantages if you’re willing to work hard and build a relationship with the company, for example, demonstrate your interest by being the first to visit. These deals take twists and turns, and you must be flexible.”   

And when evaluating targets, focus forward, not backward. “When you take over a company in a distress sale, you’re almost always buying it debt-free, and the liabilities go away… Often lack of capital was a major problem for the company. . They couldn’t buy inventory. They couldn’t do certain things. You know, you can have a lower valuation because of those things, but these won’t be your problems, he says.

Where to Find the Opportunities

These companies rarely announce they’re in trouble. “Distress deals aren’t like other deals, and it’s best to be in them early,” Goldblatt explains. “When owners are dealing with early distress they keep it to a close network.  This is the best time to kind of get an early advantage. Just like if you become sick… you’re talking to your doctor, you’re talking to your closest friends. You’re not really sharing that.”

That means listening for clues: liquidity crunches, missed orders, sudden tariffs. It also means knowing who hears about distress first. “Bankruptcy lawyers are an excellent source. Same thing with the lenders… workout lenders… ABL or factor lenders or your PO lenders or your equipment lenders. Those type of professionals are going to be early to know,” he says.

Communities matter too. “They tend to congregate around the TMA or Turnaround Management Association. They go to the SFNET… They go to the ABI, American Bankruptcy Institute. They go to the NCBJ, which is the Bankruptcy Judge Conference. There are specialty conferences like IMN for restructuring,” Goldblatt says.

The Bottom Line

The government’s backstopping of markets during the Great Recession and again in 2020 suppressed distressed activity for years. But as Goldblatt points out, “Historically, they say distressed is probably about 15%. It’s probably been running at more like 1% to 2% of deal flow… Now, since August of 22, deal flow has really been kind of tight and frozen… So, there’s a good argument to be made that… we might see another era of great distress deal flow”.

Or as he frames it more simply: “Don’t be afraid. A lot of people, oh, this company has got too much leverage… that doesn’t mean that this is not a great opportunity… because what we’re trying to do is keep it from liquidating and preserve its going concern value, so it can get transferred to somebody else. And so all the good stuff can go over — the patents, the customer relationships, and their way of doing business. So distressed deals can be just a wonderful thing”..

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Aug. 2025