Portfolio and M&A strategy solutions

Creating M&A value through a capabilities lens

Businesses need to do better deals, not just bigger ones

To the outside world, a company’s products and services are its most visible activities. But too few companies create a portfolio that truly aligns with their strategy and succeeds in driving sustained outcomes. Instead, many companies compose portfolios based on short-term financial performance and then attempt to force a strategy to fit around that portfolio.

Mergers and acquisitions are a powerful way to modify a company’s portfolio and generate both long-term value and resilience. They provide companies an avenue to growth, and, if planned properly, to the further development of core strengths, as well.

 

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Portfolio Optimization

Triggers

Internal performance crisis

Strategic goals, crisis situation, financial distress

External environment change

Disruption, volatility strikes, trends, regulation

Organisational change

Rules, responsibilities, structures

Market environment

Corporate environments have become increasingly volatile, uncertain, complex and ambiguous (VUCA). With various political, environmental, social or technological market drivers impacting the market environment. These triggers may include new regulations, changing consumer preferences, environmental hazards, political tensions, technological disruptions or pandemics. Executives should monitor and assess the corporate environment regularly and identify ways to navigate modern markets successfully by mitigating risks and seizing opportunities.

Vuca trends

  • VUCA trends
  • Volatility
  • Uncertainty
  • Complexity
  • Ambiguity
  • Market drivers
  • Political
  • Environmental
  • Social
  • Technological
Defining the market

Market size

Competitive landscape

Market growth

Business models

Corporate portfolio

The corporate portfolio is a combination of the tangible and intangible assets and the market footprint. Tangible assets are defined via the operational footprint, i.e. entities, organizational units, production facilities, supply-chains, operational entanglements etc. Intangible assets are defined via the capability profile (e.g. know-how, expertise, qualifications, diversity). The market footprint is the combination of tangible and intangible assets – products and services delivered to customers across different markets via different channels based on distinctive selling propositions. A baseline assessment of the corporate portfolio defines the current positioning within the market environment and determines the point of departure for strategic portfolio optimization measures.

Operational footprint

  • Headquarters
    • BU1
    • BU2
    • BU3
  • Shared service centre
    • Company profile
    • Producst and services

Corporate strategy

The corporate strategy defines the to-be market positioning of every company both at corporate level and across all business units. The corporate strategy defines a “right to win”, including portfolio sweet spots. Executives need to define via their strategies how to best leverage market opportunities and mitigate risks of the corporate environment. 

Corporate strategy (sum of its parts)

  • Business purpose
  • Right to win
  • Governance
  • Portfolio synergies

BU Strategy (parts)

  • Products
  • Customers
  • Channels
  • Regions
  • Capabilities

Portfolio review

In dynamic VUCA markets, regular portfolio reviews become increasingly important to make sure the corporate portfolio optimally aligns with the corporate strategy. Based on the portfolio review, future business areas (part of the strategy, yet not part of the portfolio yet), core business areas (part of the strategy, and part of the portfolio) and non-core business areas (not part of the strategy, yet part of the portfolio) are being defined.

Strategic fit

  • Corporate strategy
  • Future business
  • Core business
  • Non-core business
  • Corporate Portfolio

Develop - Nurture - Exit

Portfolio optimisation

Subsequent to the corporate portfolio review and its findings, strategic measures need to be defined to enhance the strategic fit of the corporate portfolio.

According to the categorization of the corporate portfolio into future-, core- and non-core business, adequate strategic measures focus on nurture, retain and exit and can both be delivered via organic or inorganic means. To develop future business areas, capital should be invested to nurture ideas and develop new capabilities.

Corporate layer (sum of its parts)

  • Operational synergies
  • Conglomerate manegement
  • Valuation
  • Tax strategy

BU layer (parts)

  • Organic
  • Research & Development
  • Digitalisation
  • Oper Jorg improvement
  • Corporate venturing
  • Digital ecosystems
  • Repositioning/restructuring
  • Liquidation
  • Inorganic
  • Acquiisitions
  • Collaboratiions and partnerships
  • Jointy ventures
  • IPOs
  • Divestments

Our solution? Optimize your portfolio to fit your differentiating capabilities

Portfolio management framework

At Strategy&, our data-driven community of solvers has found strong evidence that capabilities-driven deals—those that leverage the buyer’s key strengths or help enhance them—produce significantly better results, on average, than deals with limited capabilities fit.

Through our in-depth research and tech-powered analyses, our team of strategy experts empowers companies to follow this capabilities-driven approach to portfolio and M&A strategy and focus on the things they do better than anyone else. 

The result? Structural competitive advantage that allows companies to carve out a formidable position in the market, create steep barriers to entry for competitors, and open up good growth that lasts.

Ready to optimize your portfolio and deals? Let’s talk.

Get in touch

 

Deals don’t always produce value. So what makes the difference?

After a pandemic-induced M&A slowdown, there’s been a surge of deals around the world, and, post-pandemic, the stage is set for more. But as leaders pursue corporate acquisitions, what can they do to ensure the resources they invest produce worthwhile returns?

To answer this question, we collected and examined 800 deals, including the 50 largest acquisitions in 16 different sectors completed over the past decade. 

Click below to discover the results of the research, including more on the one key factor that differentiates a successful deal: capabilities fit between target and buyer.

Download the report

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Portfolio and M&A strategy

The Capabilities Assessment Tool

Want to know whether your company has the right capabilities to compete and win in the market?

Our Capabilities Assessment Tool is an online diagnostic designed to ask your employees to rate your company’s performance (versus industry performance) in a number of industry-specific capabilities. The tool then defines how important each of these capabilities is to your company’s success. Contact us to get started.

Get your custom assessment

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Dr. Peter Gassmann

Dr. Peter Gassmann

Global Strategy& Leader, Strategy&

Alastair Rimmer

Alastair Rimmer

Global Deals Strategy Leader, PwC United Kingdom

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