Germany's management consulting industry grows to €34 billion

15 July 2019 Consultancy.eu

The management consulting sector of Germany has grown by more than 7% for the fifth consecutive year, despite the nation’s economic troubles of late. While the news represents a drop from last year’s growth of more than 8%, the industry is currently executing a hiring drive to prepare for heightened demand in the near future.

Europe’s biggest economy has seen a difficult period in the first half of 2019, and while it ultimately avoided entering recession, it remains locked into the same slow growth that is plaguing Western Europe in the run-up to Brexit. While this usually bodes poorly for the majority of businesses in any economy facing slowing growth, the same is not always true of consulting firms, which are often sought out at the start of a crisis by firms looking for help with finding savings and securing profits.

Data from Germany’s association for management consulting firms, the BDU, has shown that the German consulting industry grew by 7.3% last year, reaching a total market value of €33.8 billion. While this technically constitutes a drop on last year’s growth rate, the industry has seen that figure hover consistently above 7% for the last five years.

Market value of Germanys management consulting sector

Germany is home to 19,250 consulting companies, with 87% of those total firms that generate annual sales of less than €1 million. At the top of the industry is a group of 40-50 players that dominate much of the market across the different areas of expertise, including strategy, mergers & acquisitions (excluding corporate finance services), operations, finance & risk, human capital and digital.

For the first time in 2018, these large consulting companies with a turnover of more than €50 million registered a growth of 7.5%, slightly faster than the overall market. Leading consultancies such as A.T. KearneyHorváth & Partners, Oliver Wyman and Simon Kucher & Partners for example all enjoyed double-digit growth last year.

Meanwhile, digital remained a major driver of growth, as organisations from across sectors roll out transformation projects in a bid to remain competitive and bolster their innovation power. Commenting on digital services in particular, BDU President Ralf Strehlau, and owner + managing partner of Anxo Management Consulting in Frankfurt said, “The high growth in this segment demonstrates how the consulting industry has adjusted to meet this need.”

More and more consultants

The continued optimism in the consulting industry is also reflected in the planned new hires. This year, 90 percent of large management consultancies with revenues of more than €10 million are planning to hire both experienced consultants and junior consultants. According to a Handelsblatt survey meanwhile, around three-quarters of mid-sized market participants also want to create new jobs for consultants.

That is not necessarily a positive indicator for the German economy, however. Indeed, many consultants may be preparing for spikes in business resulting from economic turbulence, something reflected by the fact that even though the German consulting sector seems to be performing well, sentiment toward the wider market is notably more downbeat than last year’s poll. According to the BDU’s survey, amid increasing economic uncertainties, such as the global trade conflicts and the unexplained Brexit, the number of market participants that gave a positive growth forecast for the year 2019 fell to 65% from 78%.

Germany's largest consulting firms

Similarly to other major markets, a few household names dominate Germany's management consulting industry. A boom in advisory work has driven the business of the world’s largest professional services firms in Germany to record levels. The Big Four of PwC, EY, KPMG and Deloitte grew by an average of 10% in the last fiscal year, significantly faster than the overall German economy and consultancy market.

In terms of the top strategy consultants in Germany, many have noted bullish expectations. The German wing of Boston Consulting Group (BCG) expects growth in the high single-digit percentage range in 2019. According to industry estimates, the number two on the domestic market is now making significantly more than €900 million in sales. In 2012, the group in Germany was still below the €500 million level.

The 10 largest German-origin management consulting firms

Competitor Bain & Company has spoken of a continued strong order book, with German chief Walter Sinn stating, “The momentum for the first and second quarters is well above our expectations.” At the same time, while strategy consulting market leader McKinsey & Company does not mention concrete expectations for the business in the coming year, Germany boss Cornelius Baur is confident of the future. He stated, “All companies are facing significant changes, so the need for external support is high.”

Home-grown jewels

While local arms of foreign consulting firms continue to dominate the market, however, a number of home-grown firms are also flourishing in Germany. An analysis of Germany's ten largest home-grown players shows that combined, they are outgrowing the market.

Top of the pile is Roland Berger, with its 2,400 employees bringing in revenues of €600 million. Simon Kucher & Partners is the firm’s closest German-origin rival, with revenues of €309 million, but a staff headcount of less than half that of Roland Berger – which is by far the largest such firm by way of staff. Detecon ranks as the third largest German-origin consultancy, with revenues of approximately €215 million.

Completing the list of the largest German-origin consulting firms are Horváth & Partners, Q_Perior, zeb.rolfes.schierenbeck.associates, Porsche Consulting, KPS, d-fine and goetzpartners.


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