Evidence suggests that sitting tight in the eye of the COVID-19 economic storm may not be the best route out.
Understandably, many companies are focused on what’s happening now and the immediate next — pressing critical concerns such as workforce welfare, crisis management, business process continuity and cash preservation.
We at EY recommend that companies not only address those pressing concerns, but also make crucial decisions regarding their positioning beyond the crisis. Those strategic choices will determine who emerges stronger from a period in which we can expect significant churn in company positioning.
Learning from the past to reshape your future — transactions
Early and bold choices on portfolio-transforming investments, particularly acquisitions and divestments, proved decisive in the wake of the Global Financial Crisis (GFC).
Those were brave choices in 2008–2010 given they often lowered near-term cash flows at a time when preserving capital was high on boardroom agendas. However, there is compelling evidence that these proactive strategies paid off. Similar bold strategies employed in the midst of COVID-19 could result in the creation of competitive strength and long-term value.1
Transactors (acquirers and divestors) had a 25% increase in total shareholder return (TSR) over non-transactors.