Pan-Arab sovereign investment company portfolio turnaround

The situation

A Pan-Arab GCC-focused joint-stock company that conducts equity investments and wholesale lending engaged Strategy& to develop a five-year strategic business plan in order to review its business model, decide on the most appropriate lines of business for growth, and identify the required initiatives to turn around the performance of its investment portfolio

How we helped

The Strategy& team studied the relevant regional and international benchmarks to determine industry best practices. They conducted a detailed analysis of the client’s historical performance to gain an understanding of the existing strategy and operating model. They then developed a comprehensive investment strategy and target portfolio structure, which encompassed asset allocation across geographies and sectors, a value-creation approach for the entire investment life cycle, and the size of capital deployment for both investments and banking activities.

After reviewing the performance of legacy portfolio companies, the team laid out a divestment plan for underperforming investments, and developed a turnaround plan that included financial and strategic restructuring initiatives. At the end of the design phase of the project, Strategy& submitted the detailed five-year investment strategy, a divestment schedule, and an implementation plan to support the client in executing the strategy over the next five years.

Results

With active support from Strategy& during the first year of plan implementation, the client divested a significant share of the underperforming portfolio; loss on the sale of equity was less than the plan’s target. Investments’ return on equity was improved, the banking unit’s balance sheet was optimized, and nonperforming loans were materially scaled down.

Through recommended hiring and training practices, the client transitioned to a more efficient operating model with improved capabilities.