Global Roland Berger study on restructuring

• Survey of nearly 400 companies in twelve industries worldwide
• US and Asia are expecting the economy to turn around already by the end of 2009 – all other regions are forecasting recovery for mid-2010 at the earliest
• The slowest recovery is expected for the financial services, automotive and engineered products industries, the fastest in pharma and healthcare
• Approximately half of companies are having difficulties getting new loans
• Many companies have already cut their personnel costs by more than 10% – Western Europe is bracing itself for still more waves of layoffs
• Management wants to use the crisis as a chance to cut costs and realign strategy

Companies everywhere felt the impact of the global financial and economic crisis in 2008. Particularly hard-hit were companies in North America, Europe and Japan. On average, global forecasts are predicting recovery no earlier than mid-2010. Managers in the US and Asia are somewhat more optimistic: they are expecting an economic upswing already by the end of 2009. These are the findings of a study entitled "Restructuring International 2009" by Roland Berger Strategy Consultants. The strategy consultancy surveyed the management boards and CEOs of about 400 international companies in twelve different industries.

"The crisis has gripped companies everywhere," says Max Falckenberg, Partner at Roland Berger Strategy Consultants. "But the worst is still to come." Companies the world over are expecting the crisis to bottom out toward the beginning of 2010. Managers in the US and Asia are optimistic, expecting their economies to start recovering by the end of 2009. Their counterparts in Europe are more pessimistic, not expecting a recovery until the second half of 2010. These are the findings of a study by Roland Berger Strategy Consultants entitled "Restructuring International 2009. The financial and economic crisis – Consequences and opportunities". The study interviewed nearly 400 companies from twelve industries around the globe.

Financial and automotive industries hit particularly hard

The financial services, automotive and engineered products industries are taking the brunt of the crisis. According to the study, these sectors will recover only slowly. The forecast for the pharmaceutical and healthcare industries is somewhat rosier: The opinion is that these industries will recover most quickly. At least half of those managers surveyed are expecting declines in sales of more than 10% in 2009. 40% of managers in Asia and Europe are assuming a decline in sales of more than 15%. In the US, 55% are forecasting a decline of more than 10%. In contrast, the situation in the UK is more positive, with 91% of companies expecting only a mild 5% decrease in sales. A few are even predicting sales growth.

Companies worldwide are facing financing problems

Another result of the crisis is that many companies around the world are encountering financing problems. 51% of those surveyed report unfavorable credit terms, and 45% are experiencing difficulties in raising new loans. In the US, the number of those reporting deteriorating credit terms went as high as 88%. Study findings indicate that the financing problems in the UK are considerably less dire.

Wave of layoffs looming/Western Europe suffers the most

According to the top executives who participated in the study, successfully combating the crisis primarily entails quickly implementing restructuring programs: 79% of the respondents named it as the most important success factor. Second most critical (76%) was "Management commitment," meaning support of the restructuring by management, followed by "Intensive project monitoring" (67%).
Some 60% of companies in the US and Europe have already cut their personnel costs by more than 10%. In the future, 30 to 50% of companies will reduce personnel costs by more than 10%, depending on the region. This holds true especially in Western Europe, where layoffs are expected to rise from 42% to 52%. Almost half of all companies surveyed rated short-time work as important to very important. To get back on track, managers are cutting costs and trying to manage liquidity better.

Companies want to cut costs and make acquisitions

From an entrepreneurial point of view, the crisis also offers opportunities: 64% of the survey respondents believe that they can now reduce their cost bases. Similarly, 64% also see opportunities for concentrating on their core business, and more than half see a chance to streamline the market. Other opportunities mentioned include sound investments and acquisitions. The study also revealed that companies recognized the benefits of government aid programs for the economy as a whole: 21% view these actions as positive. However, concerning what these government actions mean for their own companies, opinion is somewhat more critical. In global comparison, Asian companies rated the aid programs most positively.

Structural adjustments and strategic realignment

"Companies can survive the crisis and even emerge stronger from it, as long as they set the right priorities," says Falckenberg. "They need to introduce rigorous liquidity management and work closely with banks and credit insurers so that they can respond quickly to liquidity bottlenecks. In addition, structural adjustments are an absolute must for reducing fixed costs."