Restructuring advisory in Germany

• Restructuring advisory in Düsseldorf
• Restructuring advice in Frankfurt
• Restructuring advice in Munich
• Restructuring advice in Berlin

The term advisory services broadly encompasses all services aimed at a company’s executive and management levels, with the objective of providing decision-making support, offering and explaining recommendations for action, and, where necessary, implementing them.

The range of advisory services available in Germany today is extensive and often complex to navigate. Typical advisory offerings include HR advisory, IT advisory, business valuations, strategic realignment advisory, support with mergers and acquisitions (M&A), post-merger integration, and, in critical situations, the development of restructuring and turnaround concepts, the implementation of restructuring measures, and even insolvency-related advisory.

Traditionally, the advisory market in Germany (and worldwide) is divided into three main segments: IT advisory, Management advisory, HR advisory

Restructuring advisory and turnaround management advisory are considered sub-segments of management advisory.

The profession of a restructuring advisor — like that of a management advisor in general — is regulated solely by the market in Germany. In other words, it can be practiced without state or regulatory approval (unlike professions such as auditors, tax advisors, or lawyers). Consequently, restructuring advisors operate under the same legal framework as other businesses — for example, the provisions of the German Civil Code (BGB) regarding the formation of contracts.

However, as soon as advisory services touch upon legal matters, the provisions of the Legal Services Act (Rechtsdienstleistungsgesetz, e.g., § 5 RDG) must, of course, be observed. In the field of turnaround management and restructuring advisory, the provisions of the German Insolvency Code (Insolvenzordnung) are particularly relevant and must be taken into account.

The history of management advisory dates back centuries, but it has evolved and professionalised significantly over the past few decades. In the early days, advisory services were primarily offered by small partnerships or firms of tax advisors, auditors, engineers, and lawyers, who gradually expanded their service offerings.

In the 1930s, the term “management advisory” became established in the United States, and large companies increasingly engaged advisory firms for specialised topics and short-term projects requiring specific expertise for a limited period.

From 1950 onwards, American advisory firms — by then large and successful in their home market — began to expand into Europe, followed later by expansion into Asia and South America.

Between 1960 and 1980, the advisory industry began to differentiate. New, smaller specialised advisory firms or specialised teams within established management advisory firms or auditing companies entered new markets. Specialisation continues to this day and now extends across industry-specific, regional, and functional specialisations, as well as situation-specific advisory services — the latter being the case for restructuring advisory and turnaround management advisory.

After another strong period of growth up to the year 2000, the advisory industry in Germany entered a maturity phase. Today, the market is characterised by examples of consolidation, including within the restructuring advisory segment.

The economic environment for restructuring in Germany is shaped by several factors. On the one hand, the German economy has recovered from the sharp downturn in 2020 caused by the Covid-19 crisis and has grown faster than the European average. On the other hand, the economic consequences of the pandemic are still being felt in many companies, requiring them to adapt to changing market conditions, customer needs, and technological developments. In addition, new risk factors such as rising commodity prices, inflationary pressures, and geopolitical changes have emerged. These challenges particularly affect sectors such as retail, travel, and the automotive industry, all of which face a high need for restructuring.

According to the Federal and State Statistical Offices, there were a total of 120,239 insolvencies in Germany in 2021, of which 13,971 were corporate insolvencies. Compared to the previous year, this represents an increase of 57.6% in total insolvencies and a decline of 11.6% in corporate insolvencies.

Consumer insolvencies, on the other hand, rose by 79.5%. This sharp increase is primarily attributable to the impact of the Covid-19 crisis, which pushed many households into financial distress.

Corporate insolvencies remained at a low level, as the obligation to file for insolvency for over-indebted companies was temporarily suspended, and government support programmes helped to secure liquidity. However, it is expected that the number of corporate insolvencies will rise again in the coming years as the economic consequences of the pandemic and other crisis factors become more evident.

Regional Database Germany: Result 52411-02-01-4-B (regionalstatistik.de)

Please note that the number of corporate insolvencies may differ from other sources, depending on how they are defined and recorded. For example, Creditreform also counts the insolvencies of freelancers and agricultural businesses as corporate insolvencies, while Destatis counts these as consumer insolvencies.

Comprehensive surveys for reorganizations and restructurings outside of insolvency are not publicly available, as companies in crisis situations have a great interest in ensuring that their potentially existence-threatening situation does not become public knowledge. Unrest within the workforce, nervous financiers, customers jumping ship and delivery stops are just some of the negative consequences that a company in crisis should avoid in addition to the actual causes of the crisis. There is therefore a high degree of confidentiality and loyalty to the companies concerned throughout the restructuring industry. It is still common to use only project names instead of real company names in all communications.

• Auditing firms with a restructuring department (e.g. PwC – Business Recovery Services)
• Management advisors with restructuring departments (e.g. The Boston advisory Group – BCG TURN)
• Focused restructuring advisors (e.g. Turnaround Management Partners)

In addition, there is a strong regional coverage of restructuring advisors across the whole country with a concentration in the major German cities.

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The above list of restructuring advisors is not exhaustive. The list is based on analyses by Brandeins from 2022 and Turnaround Management Partners’ own research. Locations that are not Düsseldorf, Frankfurt, Munich, Hamburg, Stuttgart, Berlin or Mainz were not included in the list of restructuring advisors. Legal advisors and law firms were not included in the analysis.

Are you missing a well-known consultancy with a restructuring department/reorganization focus or a location in the List of restructuring advisors”?

Due to Germany’s strong economic importance in the global market — driven both by its numerous global players and its highly regarded Mittelstand (SMEs), which serve customers around the world — the Federal Republic of Germany represents a very attractive market for advisory firms. A weaker overall economy, industry-specific crises, or company-specific special situations regularly create demand for restructuring advisors in this environment. The “Restructuring City Guide” by Turnaround Management Partners examines the landscape of restructuring and turnaround advisory in Germany by analysing the country’s largest cities. In addition to city size (population), the relevance of each city for turnaround advisors and the restructuring industry was assessed based on the membership distribution of the Turnaround Management Association (TMA).

The Turnaround Management Association (TMA) Germany is a registered association active in the field of corporate restructuring, turnaround, and insolvency-related restructuring, promoting international collaboration and professional development among its members. The German association, Gesellschaft für Restrukturierung – TMA Deutschland e.V., operates within the framework of the TMA Turnaround Management Association, Chicago, USA, while remaining politically neutral and independent. The TMA’s membership includes many of the leading turnaround experts in Germany and worldwide — from advisors to insolvency administrators — and it is regarded as the leading professional association in the restructuring industry. Both the geographic distribution of restructuring advisory firms and the membership structure of the TMA demonstrate that Munich, Frankfurt, Düsseldorf, Hamburg, and Berlin are the most significant cities in Germany for turnaround management advisory and corporate restructuring
 

Due to the high economic relevance of Germany in the global market and both the various German global players and the strong German SME sector, which attracts customers and attention worldwide, the Federal Republic of Germany is a very attractive market for management advisors. A weakening overall economy, sector crises or company-specific special situations regularly call for restructuring advisors in this environment.

The Restructuring Cities Guide from Turnaround Management Partners sheds light on the situation for restructuring and reorganization advisors in Germany based on the largest cities in the country.

In addition to the size (number of inhabitants) of the cities, their relevance for the turnaround management consultancy and restructuring industry was assessed on the basis of their membership of the Turnaround Management Association (TMA). The Turnaround Management Association in Germany is a registered association that is active in the field of corporate restructuring and reorganization and corporate insolvencies in order to promote the international cooperation of its members and their further training. The German association Gesellschaft für Restrukturierung TMA Deutschland e.V.” acts within the framework of the guidelines of the TMA Turnaround Management Association, Chicago, USA; however, it is to be understood as politically neutral and independent. Well-known turnaround experts in Germany and around the world – from management advisors to insolvency administrators – are represented in the TMA and the association is to be seen as the leading association in the restructuring sector. The distribution of TMA members shows that Munich, Frankfurt, Düsseldorf, Hamburg and Berlin are the most interesting cities for turnaround management advisory and corporate restructuring.