One in four companies expects a “wave of insolvencies” / This is how companies are reacting now (Verian survey)

These are the results of a recent survey conducted by the market research institute Verian (formerly: Kantar Public) on behalf of the management consultancy FTI-Andersch in the automotive, mechanical and plant engineering, consumer goods and retail sectors.

• More than a quarter (26 percent) of companies in the mechanical and plant engineering and consumer goods sectors are currently undergoing restructuring
• 57 and 52 percent of the industrial and commercial companies surveyed want to postpone investments
• One in four of the retailers surveyed (24 percent) sees opportunities for acquisitions in their own industry

Particularly pronounced: in the retail sector (non-food), 34 percent of those surveyed see or expect a wave of insolvencies. In the consumer goods (26 percent) and automotive (24 percent) industries, the figure is one quarter in each case, while in the mechanical and plant engineering sector it is 14 percent.

Regardless of whether the respondents already describe the insolvencies as a “wave”, two out of three companies in the retail sector (60 percent) stated that they see more frequent or even significantly more frequent (twelve percent) insolvencies in their own industry , 46 percent observe it in the consumer goods industry (significantly more often: six percent), 40 percent in the automotive industry (significantly more often: twelve percent) and in mechanical and plant engineering (significantly more often: four percent).

“So far, we are not seeing a wave of insolvencies, but we are seeing a significant increase,” says Christian Säuberlich, Senior Partner and Spokesman of the Executive Board of FTI-Andersch, the restructuring, business transformation and transactions specialist consulting unit of FTI Consulting in Germany. ”The results of our survey show that a significant proportion of companies see the next 24 months as a major challenge. And it could get even more difficult, because many refinancing arrangements are due by the end of 2025. This could be another moment of truth for many companies. What does make me optimistic, though, is that almost half of the companies are actively taking countermeasures and have initiated important restructurings and transformations to both survive this difficult phase and realign themselves in the long term.”

Companies in sectors with a lower expectation of insolvency are more likely to be undergoing restructuring

The companies surveyed are reacting to the looming wave in three ways: restructuring, taking concrete measures for failures and examining takeover opportunities.

Half (47 percent) of the companies are currently focusing on restructuring within their own organization and planning for it. More than a quarter (26 percent) of the companies in the mechanical and plant engineering and consumer goods sectors are undergoing restructuring, while the figure is 22 percent in the retail sector and 18 percent in the automotive industry.

A clear majority in each sector are taking concrete measures to prepare for customer and supplier defaults in their own industry. In industry, companies are focusing primarily on measures to secure their supply chain: 71 percent are tapping into new suppliers, 67 percent are regularly screening their suppliers, and 65 percent are now looking to tap into new markets on the customer side. In retail, the picture is different: seven out of ten companies (70 percent) are focusing primarily on building financial reserves to compensate for lost sales. Only half (48 percent) are now examining their supply structure.

Christian Säuberlich says: “The figures confirm what we are also seeing in practice. In particular, in companies that are financially more robust, many restructurings are carried out with the aim of avoiding crises in the first place. In the retail and automotive industries, on the other hand, these restructurings are also taking place, but much more frequently when a company is on the verge of insolvency or has already filed for bankruptcy.”

Strong market players are now looking for M&A targets

There are also German companies that see opportunities in the current situation – and not only from abroad. These are increasingly exploring takeovers precisely because of the expected insolvencies. 62 percent of companies in the consumer goods industry see opportunities for takeovers in the looming wave of insolvencies, 42 percent in the automotive industry and 29 percent in mechanical and plant engineering, as well as almost one in four of the retailers surveyed (24 percent).

“These are the companies that did their homework in the past and now have a strong position in their industries. Certain consolidation efforts in the industries can serve to scale better in the future and emerge stronger in the market,” says Christian Säuberlich. ”We are also observing another driver of corporate takeovers: an increasing number of business owners are unable to find successors, partly as a result of demographic change.”

Majority want to postpone investments – which makes it more difficult to tackle long-term challenges

Verian's study reveals that not only short-term problems need to be addressed, but that long-term challenges also need to be tackled. The biggest structural challenge remains the labor shortage (81 percent in industry; 80 percent in trade), followed by bureaucracy (73 percent in industry; 80 percent in trade). In addition, energy prices continue to be a problem for the manufacturing industry (69 percent), while changes in purchasing behavior and the general consumer mood are a challenge for the retail sector (70 percent).

“Of course, survival must be prioritized over future measures,” says Christian Säuberlich. ”But it is also clear that if you don't simultaneously focus on long-term transformation, you risk being insufficiently competitive again after an acute survival phase. This also applies to companies that are still supposedly healthy now.”

The study does not show that the majority of companies are boldly investing in the future. 57 and 52 percent of the industrial and commercial companies surveyed, respectively, want to postpone investments. And, surprisingly, most companies do not appear to be dealing with major innovation at all: 75 percent have come to the conclusion that artificial intelligence is of little or no (23 percent) relevance to them. Christian Säuberlich says: “Postponing investments in the short term can make sense in uncertain, economically tense phases. However, a prolonged investment backlog can result in significant losses in competitiveness.”

About the Kantar Public study:

As part of the 'German Economic Pulse 2024' study, the market research company Verian (formerly: Kantar Public) conducted for us a telephone survey of 200 companies in Germany from the automotive, mechanical and plant engineering, consumer goods and retail sectors on current topics related to economic outlook, restructuring, insolvencies, refinancing and other structural challenges.

The companies' sales amount to at least 50 million euros. Around a quarter of the companies surveyed generate more than 500 million euros a year. The survey period is the second quarter of 2024.

About FTI-Andersch:

FTI-Andersch is a management consultancy that supports its clients in the development and implementation of sustainable future/performance and restructuring concepts. FTI-Andersch actively supports companies that have to deal with strategic, operational or financial challenges and transformation processes – or want to align their business model, organization and processes for the future at an early stage.

Clients include medium-sized companies and large corporations. FTI-Andersch is part of the FTI Consulting Group (NYSE: FCN), which has more than 8,000 employees worldwide.