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Originally published in ABF Journal, by Rita Garwood.
Distress is rising across commercial real estate, healthcare, trucking, consumer goods and more, driven by tariffs, rising costs, labor shortages and tighter lending. Top restructuring advisors share where the pressure is building, how companies are getting tripped up and what to expect as the market heads toward a busier 2026.
What industries are most in need of restructuring or turnaround support right now, and what’s driving distress in those sectors?
Howard Brod Brownstein: Industries that are vulnerable to the recent and/or possible future changes in tariffs are experiencing a lot of dislocation, since the amount of the tariffs can eliminate all or most of their profits. The overall political uncertainty has made long-term planning more difficult, including making decisions whose impact may not be realized for a while.
Clifford Croley: We are seeing significant activity in the automotive supply chain, logistics/trucking, and consumer products sectors. Many of these cases stem from changes at the customer level (such as demand, pricing, or other pressures), leading to operational or financial mistakes for our clients. We believe almost any situation can be successfully resolved with the client company returned to profitability and stability if the client quickly responds and aggressively adjusts course, taking whatever action may be necessary. In automotive, suppliers sometimes take on too much capital risk, believing unrealistic volume projections from their automotive customers and not protecting themselves in case the actual demand falls short. Many client situations have an unclear assessment of the true demand for their product at the customer level. For logistics and trucking, many clients overleveraged themselves during low-interest bank loan times and took on significant risk for rising interest rates. Couple this with volume reductions and pricing pressure, many clients face lowering margins and increasing financing costs. This holds true for consumer goods manufacturers that may have over-inventoried themselves assuming higher consumer demand.
Pat Diercks: The greatest distress currently sits in commercial real estate, healthcare, retail and P/E backed manufacturing and logistics. As it relates to commercial real estate, office and urban multifamily properties are facing debt maturities, high vacancy rates and devalued assets as hybrid work persists. The healthcare sector (especially regional systems and specialty providers) is plagued by labor shortages, insurance reimbursement lags and wage inflation. Retail and consumer product companies are just starting to encounter the impacts of tariffs, which are adding to further inflation, while shifts in consumer spending and lower consumer sentiment will likely erode margins due to increased discounting. PE backed manufacturing and logistics are already heavily leveraged, which, when combined with softening demand, are putting pressure on covenants and negatively impacting liquidity.
Adam Duso: Many industries are facing distress due to rising costs, increased consolidation and competition, an inability to access responsible capital, and the effects of tariffs. Some examples of sectors that have been disproportionately affected are construction, trucking and logistics, senior living, retail, and restaurants/food service. Construction and retail are affected by the rising cost of goods deriving from tariffs and trade policy, as well as from the recent high borrowing costs for consumers and households. Tariff stabilization, combined with continued interest rate reductions, may provide some long-term relief in these sectors. However, until these effects are realized, these industries remain highly fragile. Restaurants, senior living facilities, and trucking and logistics companies are also feeling the impact of tariffs and higher borrowing costs, both for the businesses and their customers. Additionally, they face labor shortages, which result in rising payroll costs necessary to keep key employees in sectors that primarily compete on a lowest-price model. Without increased demand and higher prices throughout these sectors, these industries will remain fragile, even in an ideal macroeconomic climate.
Robert Katz: Health Care, Hospitals and Nursing Homes. One of the most fascinating, deep, and complicated questions is: Should “For Profit Entities” be allowed to own entities where truly life altering conditions may take place? Especially, where/when, if needed, services are cut or reduced, could have life-threatening consequences.
For hospitals, nursing homes, and similar entities, profits are generally not the priority. Additionally, delayed payments from major insurance companies place significant financial strain on hospitals and other entities providing critical services that cannot sustain extended, delayed and stretched receivables and slowed payments.
Education. The “value proposition” of higher education is under increased scrutiny and more relevant than ever. With tuition and costs exceeding $70,000 or more at certain institutions for a college education, stakeholders (i.e., families) are questioning the return on investment, especially given the availability of more affordable alternatives, both domestically and internationally.
How have recent macroeconomic pressures changed your approach to turnaround strategy?
Brownstein: While turnaround management is always somewhat short-term oriented, since a company’s current profitability and cash flow are typically the most pressing issues, the current macroeconomic pressures have made longer-term planning more difficult. So planning for the ultimate outcome of the turnaround effort has become more problematic.
Croley: We quickly assess customer demand and pricing to make sure clients are properly addressing. This includes reviewing commodity cost impacts, including international shipping rates and tariffs, along with other cost input changes. Companies need to ensure they are operating efficiently, so contemporaneously with evaluating demand and cost, we ensure clients are running efficiently. Oftentimes, clients hesitate to pass commodity cost changes on to their clients. We encourage prompt actions when required along these lines. Changing commodity costs, along with quickly rising interest rates, coupled with slow client response, are big drivers of company distress these days. Client turnaround strategy needs to be adjusted and accelerated to address these issues, especially if the problems have been allowed to metastasize at the client level. If this has occurred, the turnaround strategy needs to move even more quickly and aggressively.
Diercks: Persistent, higher interest rates and tight credit have somewhat reshaped the current turnaround playbook. While liquidity and cash management remain a central focus, there is an increased concentration on covenant analytics, diversification of lending relationships, realistic capital structure planning and operational improvements that not only preserve liquidity but also focus on pricing optimization and disciplined procurement. Operational efficiency is also paramount in trying to offset inflation-driven cost increases.
Duso: Economic pressures, including international trade policy, tariffs, monetary policy, and industry saturation, all become part of an initial assessment of a turnaround opportunity. Waiting for the economy to “go back to the way it was” is not a viable strategy. Making financial projections that account for factors such as market competition, sustained increased cost of goods due to tariffs, the cost of shifting supply chains, gradually lowering interest rates, and basic financial performance trends of the business allows you to determine whether the company can thrive and compete in the new economic climate. If it cannot, the company needs to be liquidated. If the model supports different turnaround options, a restructuring professional can then explore which process of restructuring would best fit the fact pattern and deploy a process that maximizes value.
Katz: A successful turnaround strategy requires a clear plan, vision, timeline, and effective execution, supported by robust contingency planning. Leaders and organizations must be prepared for uncertainties such as tariffs, pandemics, market disruptions, and technological changes. The ability to manage changes is critical; thorough preparation and contingency planning help organizations mitigate stress and ensure resilience. By helping clients anticipate challenges, we enable them to be ready for adverse scenarios, even if those scenarios do not materialize.
Most situations in life start out with a good and well-thought-out plan. Sometimes execution may change by the day, or even the hour. Helping clients prepare, so they can hopefully say “we planned for the worst, only to have it not occur.
What are some common missteps companies make when facing financial or operational distress, and how do you help course-correct?
Brownstein: All too often, the tendency is for companies in distress to focus on the things they can do, not what they should do. In other words, they “do the wrong things right”. The changes that are actually required are often difficult and uncomfortable for management, and involve implicit or explicit admission of past mistakes. As a result, “implicit bias” can be an important factor, and is one of the reasons that the assistance of an outside turnaround professional may be important.
Croley: Many clients and their lenders may have an overly optimistic view of the level of problems or risk to their situations. Common missteps are: 1) Waiting too long to take necessary action, 2) Assuming incorrect customer demand, 3) Holding on to operating resources too long out of fear of not getting them back, 4) Not making internal executive changes quickly enough, 5) Taking high capital risk on uncertain programs or projects and 6) Many others.
Diercks: The common missteps we have seen lately include delays in recognizing distress and subsequently taking timely action to mitigate. Companies are relying on continued lender forbearance versus effectuating operational change. They also struggle with the lack of consensus amongst stakeholders as to the best path forward. Course-correction begins with the engagement of an independent third party to assess the situation, the implementation of disciplined short-term cash management strategies and clear, open lines of communication to rebuild credibility and stabilize confidence amongst stakeholders.
Duso: The number one most common thing we see is people relying on quick access capital to solve cash flow issues. While convenient and fast, these MCA and alternative lenders are expensive and a significant drain on a business’s future cash flow, especially for those already struggling. Daily and weekly payments can drain future cash flow, causing firms to seek additional loans to stay afloat, which further erodes capital, increases debt, and reduces the likelihood of a turnaround. Instead, companies should work with trusted advisors and their senior secured lender to devise a turnaround strategy that stops the high-interest debt cycle and collateral erosion. The business, its trusted advisors, and the senior secured lenders should have aligned on the incentives of increasing value and recovery to all stakeholders.
Katz: We have two ears and one mouth, because we should listen twice as much as we speak. People do not listen enough. How many times is somebody already responding before you have finished asking the question?
Self-awareness and empathy. In today’s world, which moves so fast and where people seem more stressed and shorter tempered than ever. Self-awareness and empathy are needed more than ever and seem to be present less than ever. Being able to understand what other stakeholders are working to accomplish will better enable you to achieve your goals and work toward course correction.
I wish I said it as eloquently, but Donald R. James, DBA, the CEO of Solero Technologies, captured the answer in the November 2025 Edition of the Journal of Corporate Renewal: “…Ensure that employees have a clear purpose, a mental picture of the future, a plan to follow and a meaningful role to play. By fostering transparency, inclusion and a safe space for feedback, leaders can transform passive observers into active contributors, assuring that organizations not only survive disruption but emerge stronger.” Companies that execute on this…have a pathway to succeed.
Looking ahead to 2026, do you expect restructuring demand to increase or stabilize? What leading indicators are you watching most closely?
Brownstein: I expect restructuring demand to increase in 2026 for the reasons described above. The political climate has created enormous uncertainty, and it is likely that more companies will default on their lending requirements and experience shortages of cash and critical resources. The banks are quite aware of this increased uncertainty and will likely themselves be more demanding and less forgiving of deviations.
Croley: We believe demand for restructuring services will continue to increase. Demand for these services will be assisting clients on the volume upside as US manufacturing demand increases. There is a lower than required number of good operating and financial managers in the market, so as domestic volumes and customer demand increase, there will be many clients who will not have the ability to respond. This will be both in the financial ranks of client companies and in the operational ranks of client companies. Leading indicators are driven by U.S. tariff foreign policy, driving production back to the U.S. This, coupled with unprecedented committed capital investment from outside the US, will drive operating and financial pressure and result in companies that cannot effectively respond.
Diercks: Restructuring demand is expected to increase modestly through 2026, then stabilize as refinancing and cost pressures normalize. Leading indicators to monitor include leveraged loan and private credit maturity walls, Consumer Price Index (CPI), loan default rates, Purchasing Managers Index (PMI) and overall consumer confidence. Short of a material rate cut, mid-market and P/E backed firms will likely face sustained distress through 2026.
Duso: We anticipate an increase in demand for these services. The SBA has recently ceased financing all MCA and receivable-based financing products, further restricting lower middle-market businesses’ access to capital and leaving many without a viable path to exit their current obligations responsibly. With ongoing threats of tariffs, shifting supply chains, rising skilled labor costs, and general economic uncertainty, we expect to see consolidation, increased distress, and underperformance until such time as new funding solutions fill the market void, consumer demand increases, and trade and monetary policy normalize.
Katz: Somebody once said to me, even when the economy is at its strongest, there will always be at least 20% of the companies that need restructuring, cash flow, or operating improvement. So, there is always a “demand.”
One of the main drivers for 2026 is how creative we and our industry will be, and who will be the most nimble. Where will the opportunities come from? I believe more and more from non-traditional areas. Using technology more effectively will be at the forefront.
What will the continuing impact of tariffs be? Cost of materials, and yes, continue to keep an eye on the supply chain.
Will the country be able to fall back into a consistent routine? There is plenty, plenty of capital on the sidelines. I have been told by more than one Private Equity fund and people in the know, that once (and hopefully when) there is some more “consistency and stability,” there will be an aggressive/robust return to deal execution.
How is the role of turnaround advisors evolving beyond crisis response to include longer-term value preservation and growth strategy?
Croley: The role of turnaround advisor morphing to a trusted long-term business advisor has been evolving for about a decade now. This is accelerating as the pace of change is accelerating. Many clients, especially middle-market owner-operator or larger family-owned clients, are establishing long-term relationships with their advisors. The role is moving after the turnaround engagement is over to a strategic monitoring and board advisory relationship. Many boards like the discipline of having a restructuring professional challenge or evaluate ordinary course decision-making.
Diercks: The role of turnaround professionals will continue to include immediate crisis response but will also evolve into a longer-term focus on strategic value preservation. Engaging the right turnaround advisor pre-crisis allows for greater focus on operational performance improvement, better capital structure planning and stakeholder alignment, which will be required for companies to remain viable during periods of slower growth and increasing margin pressures.
Duso: Turnaround advisors cover a broad spectrum, from crisis management, restructuring, recovery, and growth. Historically, many turnaround groups have been brought into a situation to address a problem, typically running a restructuring process that addresses the company’s current insolvency. However, as more of these turnaround plans require long-term performance, recapitalization, and operational improvement, many turnaround professionals are finding themselves in engagements that span beyond the acute distress to the point of performance on covenants created by lenders in the initial turnaround or restructuring transaction. Lenders are becoming more creative in out-of-court restructuring processes to maximize recovery and avoid the time and expense of judicial proceedings. However, without the oversight of a court, many turnaround firms and financial advisors find themselves on engagements post-transaction to ensure performance under the new, restructured obligations. This demand for long-term performance and guidance out of an area of distress and back into the mindset of growth are services we also anticipate increasing in 2026 and the coming years.
Katz: The sweetest and best results are just that. Nothing is better than when we continue to work with a client or are asked to come back and help them sell for a significant multiple a few years later. Guiding a client through a restructuring, in or out of court, and then a sale for $60 or $70 million or more, what could be better? Part of the advisor’s role is to assist the client in planning and preparing for the future so that, hopefully, the client/company is never in this situation again.