Mergers & Acquisitions Archives

The Three Internal Barriers to Deep-Tech Corporate Venturing

Written by PandC on March 15, 2022. Posted in Research & Insights.

The benefits of deep-tech Corporate Venturing (CV) are compelling. That’s why chief innovation officers must tackle not-invented-here syndrome, risk aversion, and top-down cultures to successfully collaborate with deep-tech startups. To address NIH syndrome, a shared mandate between R&D and CV can help overcome internal biases and siloed decision-making while encouraging choices that are best for the organization as a whole. Deep tech is often associated with high risk, which can cause corporate leaders to block efforts to adopt and catalyze external innovation. To appropriately evaluate risk, senior managers should evaluate the risk levels their peers are willing to take on and choose mechanisms to match. Many times, we at P&C also recommend creating a sandbox—basically a minimum proof of concept environment, as a way of addressing risk. Furthermore, if your company’s top-down culture is getting in the way, you can enlist internal advocates or turn to outside experts to help make a convincing case. Contact us to learn more about how we help our clients effectively harness the value of deep-tech venturing.

Read the full article, here.

The 4 Pillars of Successful Digital Transformations

Written by PandC on February 8, 2022. Posted in Research & Insights.

I know…yet another Digital Transformation article. But yet there’s something specific here that deserves further exploration. That something is Pillar #4, New Ventures. Typically, the CEO, or head of sales, leads these types of initiatives because they require investment, agility, and most importantly a team capable of running experiments to validate a new business opportunity. The desired payoff is new sources of revenue, but the KPIs can be more nuanced. While many businesses are presented with opportunities such as these, seizing them requires greater digital maturity than for an IT uplift or operations endeavor. At P&C, we closely advise a great number of companies to help them evaluate and then surgically select new venture investments. If your digital journey includes this challenge, please reach out to me to learn more about our approach.

Read the full article, here.

The Rules of Co-opetition

Written by PandC on February 23, 2021. Posted in Research & Insights.

This could be ‘the year of co-opetition’—the mix of competition and cooperation. We’ve seen this phenomenon emerging over the past year and for many good reasons. At a basic level, it can be a way to save costs and avoid duplication of effort. If a project is too big or too risky for one company to manage, collaboration may be a good option. If a cooperative opportunity is on the table, start by imagining what each party will do if it’s not taken. What alternative agreements might the other side make, and what alternatives might you pursue? If you don’t agree to the deal, will someone else take your place in it? From our experience, in some industries like tech for instance, thinking through alternatives is complicated because companies have multiple relationships with one another. This article points out much to consider before embarking on any deal, even with the potential advantages of co-opetition.

Read the full Harvard Business Review article, here.

When to Ally and When to Acquire

Written by PandC on February 16, 2021. Posted in Research & Insights.

You may be surprised that historically, most acquisitions and alliances fail. Acquisitions, on average, either destroy or don’t add shareholder value, and alliances typically create very little wealth for shareholders. This article suggests that executives analyze three sets of factors before deciding on a collaboration strategy: the resources and synergies they desire, the marketplace they compete in, and their competencies at collaborating. Of course, companies must develop the ability to execute both acquisitions and alliances if they want to grow. Knowing when to use which strategy may be a greater source of competitive advantage than knowing how to execute them. One of the most interesting aspects of this article explores various synergies that can be achieved by combining and customizing resources differently—and this year presents an excellent opportunity to evaluate them.

Read the full Harvard Business Review article, here.

A Fortune Global 500 Refines Strategy to Unleash Growth

Written by PandC on February 5, 2021. Posted in Client Outcomes.

Diversified Fortune 500
Unleashes Growth
With Tailored Strategies for Cash Cows, Tigers, and the Middle

We helped our diversified conglomerate client find new business opportunities, define strategies for the holding company’s smaller businesses, and clarify the strategic and operational role of the center.

P&C Helps This Fortune 500 Conglomerate Evaluate Its Portfolio of Companies to Align with Its Profitability Targets

Our client owned many businesses in sectors that included industrial equipment, automotive components, major domestic appliances, commercial financial services, energy, and real estate development, among others. The company had diversified into several non-related businesses but had failed to achieve its profitability targets.

Its board of directors set a minimum return for all the companies in the portfolio, but many of them fell below their goals. P&C was brought in to help:

Find a new business opportunity that could eventually replace the reliable cash generator (cash cows)
Define strategies for the smaller businesses (tigers) so that they would either achieve their value creation objectives or be divested
Clarify the strategic and operational role of the center to achieve overall growth

P&C Created a Framework for Each of 4 Challenges

Challenge I

Growth in New Businesses

Identify 2-4 profitable business opportunities similar in size to current cash cows

Challenge II

Sustainability of “Cash Cows”

Define strategies to continue milking businesses through turmoil and changes in industry

Challenge III

Strategy for “Tiger Businesses”

Programs to find strategic/operational improvements or divest money-losing businesses

Challenge IV

Improve Role of Center

Articulation of new strategy and corporate role

P&C Focused on Product Line Profitability to Determine Divestiture Targets

P&C’s first priority was to redesign the money-losing businesses, or tigers. Rather than divesting whole companies, we recommended that our client divest product lines. We also delivered detailed business plans for three new endeavors and a new corporate role.

P&C’s program resulted in a dramatic increase in ROIC—from 13% to 25% over two years. Our client is now working with us on adjacent business opportunities that we identified.

*We take our clients’ confidentiality seriously. While we’ve changed their names, the results are real.

Global Diversified Conglomerate Untethers Its Holdings to Unleash Growth

Written by PandC on October 6, 2018. Posted in Client Outcomes.

Proven Results

GlobalCo*, a diverse conglomerate with operations in 118 countries and over 160,000 employees worldwide, recognized that some of its portfolio companies were missing their profitability targets among other performance issues. The company sought P&C’s guidance to identify and solve the performance and profitability issues at its holding companies.

At a Glance

The Situation

GlobalCo, a diverse conglomerate with operations on five continents, owned businesses in multiple industries including logistics, biopharmaceuticals, commercial real estate development, energy and exploration, financial services, technology infrastructure, and luxury retail. GlobalCo’s board of directors had set a minimum rate of return for invested capital for their portfolio companies, but some fell below their goals. In addition, given the rapidly growing size and scale of some its portfolio companies, GlobalCo sought opportunities to share infrastructure across the enterprise to leverage its economies of scale and reduce duplicative costs. After evaluating and eliminating complex proposed solutions with unclear outcomes from multiple global consultancies, P&C was engaged to address the following challenges:

Identify which portfolio businesses have high potential for growth and scalability and those which need to be divested.
Identify issues tethering performance at high potential businesses and define strategies to boost performance at each.
Identify any low-hanging M&A opportunities for inorganic growth at high potential businesses.
Define a strategy and approach for the creation of a shared services organization to deliver common business services across the enterprise to include the following functions: finance, accounting, treasury, audit, technology infrastructure, human resources, risk management, and corporate real estate.

Our Approach

P&C worked closely with GlobalCo’s key stakeholders – C-level leaders and stakeholders from across the company and board of directors – to gather, consolidate, and prioritize the expected outcomes of the solutions sought.

With input from key client stakeholders, we created specific frameworks to address each challenge:

Our Recommendations

P&C’s top priority was to identify which of the underperforming businesses had potential for substantial growth and which needed to be divested. Concurrently, we wanted to identify potential opportunities to improve businesses already performing well along with potential M&A opportunities to scale those businesses to a new level.

The Results

GlobalCo divested all low-potential, non-performing businesses, made two strategic acquisitions valued over $7 billion, and created a state-of-the-art shared services organization which reduced $375 million in annual costs across all of its businesses. In addition, return on operating income increased from 12 to 27 percent over a 2-year period across all businesses.