Optimism on uncertain grounds

PwC Deals Study: How decision makers perceive the current market environment and future prospects and adapt their strategies

Your expert for questions

Dr Joachim Englert
COO Advisory at PwC Germany
Tel.: +49 69 9585-5767

Corporate management in a volatile market environment 

There is strong consensus that global markets are experiencing increased volatility, uncertainty, complexity and ambiguity (VUCA). The causes are manifold: They include new regulations, changing consumer preferences, environmental hazards, political tensions, technological innovations and pandemics such as the most recent COVID-19 outbreak, which caused numerous corporate financial forecast revisions, ad-hoc announcements, profit warnings, suspended annual financial forecasts and a sharp decline of most relevant economic indicators. How are corporates and top executives impacted by that market environment? How do they find ways to navigate VUCA waters successfully? Our exclusive PwC study, which has been conducted in cooperation with Kantar and the Technical University of Darmstadt, provides valuable insights to these questions.

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"Study participants expect the COVID-19 pandemic to have only a moderately negative impact on current business and five-year prospects. This is surprising given the recent market turmoil, but also shows that participants are very confident that they will succeed in mastering the challenges ahead."

Dr Joachim Englert, COO Advisory at PwC Germany

The study at a glance

"Optimism on uncertain grounds" is the first part of the PwC Deals study and examines how decision makers perceive the current business environment and future prospects and how that impacts their strategy processes. A key insight: Decision makers in Germany, Austria and Switzerland have a remarkably positive perception of the current market situation – both regarding the impact of the unprecedented COVID-19 pandemic and the focus on overall market environment and future prospects.

In November 2020, "Mastering uncertainty and volatility" will be published as the second part of the study series and explore the impact of market VUCA on executive's portfolio and operational footprint management approaches. Finally, in December 2020, "Unlocking value through carve-outs" constitutes part three of the study series and will focus on the role of carve-outs as a strategic tool.

Study results at a glance – Part 1: Optimism on uncertain grounds

Market perception: Surprising optimism

"Optimism on uncertain grounds" as the first part of the study reveals surprising results: Corporate decision makers have a strikingly positive and optimistic view of current market conditions and prospects. Moreover, study participants expect only a modest increase of market volatility and uncertainty over the next five years. Furthermore, optimistic expectations for the five-year market attractiveness and growth opportunities are provided by the study participants.

Dr Joachim Englert shares his perspective on the optimism of corporate leaders: ”Either corporates operate in a stable market niche or underestimate the impact of the pandemic. On the other hand, the fact that the current market recovery is being bolstered considerably by various governmental measures, such as the suspension of the company’s obligation to file for insolvency or the 'Kurzarbeit' (short-time work) regulation might flaw the validity of the current positive market perception.”

"Given the huge impact of the pandemic, it remains to be seen whether the remarkable optimism among decision makers will turn out to be naivety, or bold and justifiable confidence in their skills for mastering the challenges ahead."

Erik Hummitzsch,Transaction Services Leader at PwC Germany

Among the major threats to competitive positioning in the coming years, participants perceive an overall economic downturn (80 percent of respondents), followed by environmental risks (61 percent), intensifying competition (60 percent) and regulatory risks (55 percent) as the most relevant ones. Only every fourth study participant perceives financing or debt risks as a threat. "Surprisingly, decision makers perceive the company-specific risks as less threatening than the risks for the economy as a whole", comments Neil Siri, Deal Analytics & Technology Leader at PwC Germany.

Effects on the strategy process: Focus on organic measures

Intensifying market VUCA and less attractive market and growth prospects should be leading corporate decision makers to adapt their strategy processes, e.g. their corporate strategies should focus on a shorter time horizon, and thus enable corporate decision makers to react more quickly towards changes in the market environment.

Yet the study shows that decision makers are defining their strategies for the next five years with a more or less constant time horizon - a surprising result given the further increase of VUCA strikes. However, the assessment of market attractiveness and future prospects correlates with the time intervals in which the decision makers review their corporate strategy: The more pessimistic the respondents are about market attractiveness and future prospects, the more likely they are to shorten the time horizon for reviewing their corporate strategy.

As key triggering event for an adaptation of the corporate strategy, 91 percent of respondents mentioned changed consumer preferences, 75 percent stated changes in the competitive environment. Regarding the relevance for realising corporate goals over the next five years, efficiency optimisation, focus on core business and development of new technologies stand out as the most important measures, whereas a realignment of business focus is considered the least important.

Most important strategic measures over the next five years largely focus on organic measures such as growth programmes (75 percent), restructuring (71 percent) and research and development (62 percent). Inorganic measures such as transactions are much less frequently on the agenda to adjust the competitive positioning: Only 11 percent consider carve-outs as a relevant measure and 38 percent joint ventures. At least, every second respondent mentions the acquisition of a company as a relevant option.


"Decision makers are primarily taking organic measures to stabilize and optimize their business. They tend to stick to their current strategy and neglect the time and scale advantages of inorganic measures such as acquisitions or sell-offs."

Samy Walleyo,Delivering Deal Value Leader at PwC Germany

Many decision makers are currently focusing on their core business and greater efficiency. Only a minority are considering transactions to quickly and effectively counter new trends in dynamic markets. Tobias Huesmann, Director Delivering Deal Value at PwC Germany, believes this is a mistake, because: "It usually takes longer and ties up more resources to achieve strategic goals through organic measures. This is particularly true in a volatile market environment, where the winner is the one who stands out from the competition through agile and decisive strategic measures," the expert says. In his view, carve-outs are a good way to release capital where it generates poor returns and instead invest in the promising core business, for example new technologies or products or markets.

"The current COVID-19 pandemic has definitely caused lots of harm, yet bold and decisive decision makers can also make use of the window of opportunity to turn it into a catalyst for transformative change and innovation."

Tobias Huesmann,Director Delivering Deal Value at PwC Germany

Read now part 2 of our three-part Deals Study: “Mastering uncertainty and volatility”

Mastering uncertainty and volatility: The second part of our latest Deals study analyzes how the perception of market structures and market prospects affects the company portfolio and the actions of decision-makers. In focus: Portfolio management and the control of operational corporate structures.

Read more

Read now part 3 of our three-part Deals Study: “Unlocking value through carve-outs”

A strategic approach to carve-outs:In an increasingly uncertain and complex market environment, strategic carve-outs are getting more important. The third part of the study examines the role of carve-outs as a strategic instrument – and how decision-makers can significantly increase the success of carve-outs.

Read more

About the study

In cooperation with Kantar and the Technical University of Darmstadt, PwC conducted a three-part study with focus on companies in the DACH region (Germany, Austria, Switzerland) with an annual turnover of more than €300m. A total of 157 decision makers (board level, M&A/strategy lead or similar position) participated in the study.

Contact us

Dr Joachim Englert

Dr Joachim Englert

COO Advisory, PwC Germany

Tel: +49 69 9585-5767

Erik Hummitzsch

Erik Hummitzsch

Mitglied der Geschäftsführung, Leiter Deal-Advisory und Co-Leiter Consulting Solutions, PwC Germany

Samy Walleyo

Samy Walleyo

Partner, Delivering Deal Value Leader, PwC Germany

Neil Siri

Neil Siri

Partner, PwC Germany

Tobias Huesmann

Tobias Huesmann

Director, PwC Germany

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