2014 was another strong year for management consulting firms in Germany, reveals a new study conducted among 65 consultancies active in the country. On average sales growth reached 6%, significantly stronger than the average in other European markets, yet at the same time weaker than in the previous years. For 2015 and beyond, the outlook is positive.
With a market value of €25.2 billion, Germany’s management consulting market is following the UK as the second largest advisory industry in Europe. According to data from the BDU*, the German association for consulting firms, the industry employs around 106,000 consultants, housed by more than 15,000 consulting firms. The total workforce in the industry is estimated to be around 130,000**.
BDU’s most recent analysis of the German advisory landscape revealed that in 2014 the market grew by 6%, bringing the industry to nearly double the size it was in 2005. A new research by Lünendonk, conducted among 65 management consulting firms and 60 clients of consultants, reconfirms BDU’s analysis, with the more recent study concluding that growth amounted to 5.9%. According to the researchers, large consultancies, firms with a turnover of more than €50 million, significantly outperformed their medium-sized and smaller counterparts, growing by an average of 9.2%.
When asked for key focus areas, consultants indicate Efficiency Improvement, Digital and Growth Strategies as the top 3 service areas. Client interestingly have different views on priorities, illustrated for instance by the large differences in perceptions on the service offerings of Industry4.0, Restructuring and Mergers & Acquisitions.
Although expectations for revenue growth in 2014 were only partly fulfilled, and growth considerably trailed 2013 performance (13% growth), the survey participants are optimistic about the future. Both for 2016 and the years beyond do firms expect to increase their business revenues by an average of 9% - 10% per annum. In comparison, BDU’s research forecasts a growth rate of 7% for 2015, while another study by analyst firm Source estimates that growth in Germany will reach about 8% this year. According to Lünendonk’s data, in particular medium-sized consultancies (€15 to €50 million revenue) have a bright outlook, with double-digit annual revenue growth rates foreseen for the investigated period.
Earlier this month, Consultancy.uk featured an analysis on the German auditing, tax and financial advisory market, revealing that the top 25 players earn a combined revenue of €6.4 billion, with the Big Four holding a staggering 79% of the market.
* BDU = Bundesverband Deutscher Unternehmensberater.
** The MCA, the UK association for consultancies, estimates the UK consulting market to be worth £8.6 billion, yet the MCA applies a narrower market definition compared to the BDU. According to Source Information Services, which utilises similar market assessment models across regions, the German advisory market was worth €6.5 billion in 2014, while the UK market was valued at £6 billion, slightly larger than the Germans.