Three critical stages in managing and increasing corporate value

 
1. Understand Value—Identify and measure sources of value and cash flow

Analyse sources of cash flow and how the markets value the business and its options. Use value as the benchmark to direct resources to the highest and best use—and to shape strategic communications with managers and stakeholders.

 

Key actions:

  • Objectively and critically assess strategic and financial positioning

  • Understand the sources and timing of cash flow and financing requirements

  • Understand organizational and structural barriers to cash flow growth

  • Understand the basis and implications of management metrics, reporting and forecasting systems

  • Understand the current and potential value of core businesses

  • Understand and benchmark cost structure

  • Assess return on capital invested/employed in each business line and activity

  • Value current strategies and business plans and tax attributes

  • Understand capital markets positioning and key capital markets value drivers

  • Assess core assets and intellectual property (IP) as a source of future growth, value and monetization

  • Understand value and risk drivers of contemplated transactions

  • Determine tax, regulatory and legal implications of business options or contemplated transactions 

 
2. Protect Value—Enhance liquidity and optimize the capital structure

Build a fact-based, defensible and executable plan to ensure (and restore) investor and analyst confidence in management. Strategies may include creating net liquidity by rationing capital among business units and projects; hedging costs; enhancing management of working capital investments; rationalizing operations and infrastructure; and selectively divesting non-core assets. Strategically manage internal/external constituent expectations to stabilize market sentiment and ensure adequate time is available to restructure.

 

Key actions:

  • Evaluate strategic options to protect and grow value
  • Raise capital to continue funding of profitable businesses and investment projects—plan, structure, negotiate and complete equity and debt financing agreements
  • Raise cash —sell unsecured businesses, ventures, technologies or IP
  • Model and stress-test business plan assumptions and economics to assess cash flow generation and capital structure adequacy
  • Manage cash and working capital
  • Protect receivables from default and liquidation
  • Measure value contribution and capital requirements of business units and investments
  • Re-deploy capital to areas of best use
  • Design and negotiate a capital structure to promote growth and flexibility
  • Identify tax-efficient capital and financing structures
  • Validate accounting, legal and tax implications of desired capital structure and financing approach
  • Ensure earnings visibility to the capital markets, analysts and other investor constituencies

 
3. Grow Value—Develop options for improvement, redirection, and renewal.

Build an efficient core business while also creating multiple options for future growth and expansion. Create a flexible and adequate capital structure and funding strategy to support both current operational requirements and future growth opportunities. Create an M&A strategy that is linked to the business strategy. Provide fact-based communications to ensure that full valuation is realized on the restructuring and growth strategy.

 

Key actions:

  • Identify potential and options for growth
  • Develop a solid and defensible corporate growth strategy and performance improvement plan
  • Develop a robust, stress-tested business plan for the going concern and for each new strategic initiative
  • Focus growth strategy, investment and financing approach, performance improvement plan and M&A activity on the core value-creating aspects of the businesses
  • Selectively divest non-core businesses or assets, and invest strategically in critical (core) assets
  • Globalize: protect and expand overall market share and revenue streams
  • Pursue strategic alliances: to gain access to new markets, increase relevant market share, reduce risks and better leverage valuable resources
  • Improve corporate governance: align board and management around value protection and growth strategies
  • Invest in growing the business through strategic transactions: identify and execute opportunistic acquisitions: to exploit stranded assets available from failing companies, such as well-developed technology
  • Strategically manage analysts’ understanding of business plans, performance improvement/repositioning efforts and transactions strategies
  • Successfully integrate transactions