Dusseldorf In the management floors of the German economy, restructuring experts are currently frequently seen guests. The number of restructuring cases is high. The car suppliers Benteler, Mahle, Eberspächer, WKW, Kostal and Leoni also receive advice on restructuring, as does the retailer Galeria Kaufhof, the fashion chain Takko, the electricity supplier Steag and the real estate groups Adler and Corestate.
The restructuring market is growing during the crisis, but many consulting firms are competing for restructuring contracts. The consulting units of the “Big Four”, the four largest auditing firms Deloitte, EY, KPMG and PwC, advise on restructurings, as do the leading international strategy consultancies McKinsey, Boston Consulting and Bain and the largest German management consultancy Roland Berger. There are also investment banks such as Houlihan Lokey, PJT, Macquarie and Rothschild.
Three consulting firms have completely specialized in restructuring. They are often the ideal solution for banks, financial investors or owners when a company slips into an existential crisis: Alvarez & Marsal (A&M), Alix Partners and FTI-Andersch.
Restructurers “get their hands dirty”
They go particularly deep with the restructuring and “get their hands dirty”, as A&M advertises. Not only do they give ailing companies good advice, they also send employees to management positions if requested. As Chief Restructuring Officer (CRO), they implement the recommended measures such as downsizing and relocation themselves over a period of months or years. A&M partner Johann Strohner was already a member of the management of the restaurant chain Vapiano, the packaging specialist Schur Flexibles/adapa, Mattresses Concord and the cinema chain AMC/UCI in Germany. Alix partner Michael Baur is currently CRO at the automotive supplier Benteler, and Hans-Joachim Ziems from the boutique consultancy Ziems & Partner at Leoni.
With this direct commitment, the “big three” of the restructuring companies differ fundamentally from the business practices of the strategy consultancies McKinsey, BCG and Bain. “Our strength lies in advising,” explains Jochen Schönfelder, head of BCG’s restructuring unit in Central Europe, when asked. If necessary, they work “hand in hand with the best and most experienced CROs”.
Restructuring: How good are Alix Partners, FTI-Andersch and Alvarez & Marsal?
The three restructuring companies have their roots in the USA. For a long time, this was a disadvantage for them in the German economy. But the big commercial banks have reduced their restructuring departments in recent years, partly because they were no longer considered important enough because of the long-thriving German economy.
As a result, many German commercial banks resold loans from ailing companies to financial investors and credit funds. And that’s where Alix, FTI-Andersch and A&M have the best contacts with their US roots.
Alvarez & Marsal expects sales to grow by 20 percent this year
The largest restructuring consultancy in Germany today is Alvarez & Marsal. The mood at the founder-led company, which is organized as a partnership, is good: “We don’t expect a tsunami in 2023, but we do expect a strong storm,” said the head of the German restructuring business, Johann Stohner, to the Handelsblatt.
As a result, Alvarez & Marsal’s sales in Germany will increase by around 20 percent to more than 100 million euros, Stohner expects. A&M also needs more staff for this, and according to Stohner, the number of employees in Germany should increase by at least 15 percent from the current 300.
A&M partner Johann Stohner describes the day-to-day business as tough: “We restructurers often only come when the crisis is threatening the company’s existence. And then we usually work under extreme time pressure, after all it’s about the survival of the company.”
Alvarez & Marsal has been active in Germany since 2002. After some initial difficulties, the company has also established itself in Germany over the past ten years – against the economic market trend, which is actually too good for restructuring advice.
Tony Alvarez and Bryan Marsal founded A&M in New York in 1983. During the financial crisis at the end of the noughties, the company was commissioned to restructure and liquidate the investment bank Lehman Brothers. The bank became a symbol of the bursting speculative bubble that triggered the crisis – and also made Alvarez & Marsal internationally known.
A&M has around 7,000 employees worldwide and generated sales of around two billion dollars in 2022.
Alix Partners: Driven by financial investors
The number two of the specialized restructuring consultancies in Germany is Alix Partners. The company, controlled by founder Jay Alix and some investors, including financial investor CVC, acts the most aggressively, also communicatively. A few weeks ago, Alix celebrated its 20th anniversary in the German market by naming numerous new partners, including homegrown talent and newcomers from other consultants and from the industry.
Alix Germany boss Andreas Rüter is happy that the company has never tried to offer advice outside of restructuring and thus compete more directly with McKinsey, BCG and Bain. Alix Partners will remain “a consultancy focused on complex, urgent and complicated projects,” says Rüter.
Of the 180 Alix consultants in Germany, 100 are restructuring experts. In addition, the company does not hire young professionals, only experienced managers and consultants.
For 2023, Rüter expects growth of 18 percent for Alix Partners in Germany. The consultancy does not give any absolute figures for individual markets. Alix Partners has around 2,500 employees worldwide and, according to its own statements, generates sales of 1.7 billion dollars.
Wirecard was the first major task for FTI-Andersch after the takeover
The case of the Dax group Wirecard in 2020 was the first major task of the consulting firm Andersch, which had just been taken over by the US restructuring consultancy FTI. At the time, FTI was the world’s largest consulting firm specializing in restructuring, with its own forensics and cyber security units. Andersch was once a spin-off from the auditing company KPMG in Berlin and had around 90 employees in 2019.
But invented businesses and corporate assets cannot be restructured even by specialists. Wirecard made economic history as the first Dax group to file for bankruptcy. The company is thus one of the most prominent examples of the fact that restructuring advice can sometimes only be handed over to the insolvency administrator after all measures have been exhausted.
FTI-Andersch has had more success in recent years with German medium-sized companies and has restructured the printing machine manufacturer König & Bauer, the retail chain Butlers, the machine manufacturer Elumatec and the industrial supplier Weber Hydraulics. In 2022, FTI also took over the Dutch restructuring consultancy Bold.
FTI Andersch CEO Christian Säuberlich expects “high demand” for 2023. His team of 125 employees has been “full to capacity” since the end of 2022. Above all, the increased financing costs would get companies into trouble, but he does not expect a “big wave” of insolvencies in Germany. The economy is doing too well for that and the government aid measures are too strong.
Nevertheless, Germany is “a core investment market” for the listed parent company FTI, which recently had annual sales of $2.78 billion and around 7,000 employees, says Säuberlich. FTI is currently moving into its own floor in the Marienturm in downtown Frankfurt with special units.
Tough price war: Restructuring shouldn’t actually cost anything
The three large restructuring consultancies want to grow significantly in Germany – this creates competition and price pressure. In addition, a renovation should actually cost nothing anyway. While companies are downsizing or selling parts of the company, they cannot pay high consulting fees at the same time.
Alvarez & Marsal, Alix Partners and FTI-Andersch and their big competitors therefore often work on a success-related basis. You can advise for up to 18 months free of charge and only collect if you are successful.
The case of Air Berlin showed that this can go wrong: McKinsey advised on the restructuring and was ultimately able to book new experiences instead of fees.
More: McKinsey, BCG and Bain: Restructuring is becoming a hot topic for consultants