CEOs and CFOs want to be confident that the decisions they make about their portfolios will generate lasting value.
In the past, portfolio management involved milking cash cows, divesting dogs and investing in stars. This model worked well at a time when investors trusted management to deliver long-term results. Our collaborative research with the Wharton School1 has shown that markets nowadays penalize companies that hold onto businesses with disparate growth, margins or capital intensity in the absence of a clear rationale.
How can business leaders adjust? In an assessment of over 800 activist campaigns KPMG found that activists generate nearly 7% above-market returns, on average, when the companies they invest in reshape their portfolio and invest in core businesses.2 To be effective in this new world, corporate leaders can start by thinking like activist investors. This requires a clear-eyed approach to the allocation of the organization’s scarcest resources—capital and management focus. By marrying top-down strategic hypotheses with sophisticated analytics, leaders can decide where to invest, where to divest and where to drive adjacent inorganic growth.
We believe an analytics-enabled approach combining solutions that are usually applied in the deal environment—such as due diligence, economic value assessments, tax-efficient planning, and performance improvement—can help top management make these difficult decisions. We work as an integrated team to combine these multidisciplinary steps to deliver outcomes that enhance value. KPMG has invested hundreds of millions of dollars in tools and capabilities to accelerate from insight to action. This is how we give you the confidence to make your most important decisions.