International Restructuring Study 2012
New restructuring study by Roland Berger: European and Japanese companies expect stagnation, while about 70% see a high risk of a liquidity crisis
- 62% of European and 100% of Japanese companies see a risk of recession in their home countries
- Lower demand from private households is regarded as the main factor in a possible recession
- 84% of the companies surveyed believe the worst of the crisis is yet to come
- A third of companies in Europe and Japan have already made contingency arrangements if Greece were to leave the eurozone – a collapse of the monetary union is feared
- Two thirds of the survey participants are focusing on cost-cutting and efficiency-raising programs
- About 70% of European companies assess the risk of another liquidity crisis as high
"European companies are expecting the economy to stagnate in 2012. By contrast, last year more than 60% of the companies surveyed assessed their competitiveness as high to very high," says Tom F. Wendt, Partner at Roland Berger Strategy Consultants' Chicago office. "On average, the European regions we looked at expect economic growth of only 0.1% in 2012." 62% of the survey respondents in Europe also expect a recession in their home countries, while Japanese companies actually regard this as inevitable. The main risk is the fall in demand from private households.
Lack of growth
Western European companies in particular are planning for growth (43%), followed by Central and Eastern Europe (42%) and Asia (37%). The lack of qualified skilled workers is the biggest obstacle to growth for European (54%) and Japanese (71%) companies. Insufficient financing options are also seen as an obstacle to profitable growth.
"However, 57% of European companies consider themselves to be well or even very well positioned in the event of an economic slowdown. Only 10% feel ill-prepared," explains Wendt. "In Japan, by contrast, 24% of companies rate themselves as not ready for a new crisis." On average, European companies expect the sovereign debt crisis to peak by late 2012. Japanese companies do not expect the worst until mid-2013.
Furthermore, a possible breakup of the eurozone is contributing to uncertainty in many companies. A collapse of the monetary union is feared most in southwest Europe and Japan (more than 50% respectively). 61% of respondents believe Greece is likely to leave the eurozone. On average, over a third of study participants in Europe have either taken precautions for that eventuality or are planning to do so. 29% of Japanese companies are also considering this scenario – they are primarily examining favorable acquisition opportunities.
Growth and sales initiatives are key
To optimize their preparations for negative economic scenarios, European companies are relying primarily on cost-cutting and efficiency-raising programs (74%), as well as on growth initiatives (70%). The smallest percentage of companies (56%) planning growth initiatives is in southwest Europe, where 90% are focusing on cost reduction.
For the first time, companies are regarding commodity price and exchange rate risks as being equally important (60% for each). "It's striking that in Japan, the awareness of commodity price and exchange rate risks is significantly higher than in Europe," says Tom Wendt.
Management commitment remains the top success factor
As in previous years, management commitment remains the most important factor in any restructuring initiative in Europe and Japan (according to more than 90% of respondents). "Change can succeed only if managers set a good example themselves," says Wendt. Another factor is the need to take action quickly. It has markedly increased in importance compared to previous years, and actually tops the list in Japan.
An average of about a third of respondents expect negative effects on their financing, particularly as a result of the deteriorating working environment – caused mainly by the European sovereign debt crisis – and the new capital requirements directives under Basel III. The biggest fear is that new credit lines will not be approved or existing ones might be cut. Summing up, Wendt says: "Like last year, a company's internal financing power is therefore an essential source of funding for virtually all European companies. Implementing restructuring actions is therefore of paramount importance. This is the only way they can improve their own liquidity and guarantee financial independence."
The complete study can be downloaded at: www.rolandberger.com/pressreleases
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