Diversified Fortune 500
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
Growth in New Businesses
Identify 2-4 profitable business opportunities similar in size to current cash cows
Sustainability of “Cash Cows”
Define strategies to continue milking businesses through turmoil and changes in industry
Strategy for “Tiger Businesses”
Programs to find strategic/operational improvements or divest money-losing businesses
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.