3 minute read 16 Apr 2018
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How companies are driving portfolio and people transformations

By

Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.

3 minute read 16 Apr 2018
Related topics Capital allocation Digital

Divestitures and human capital are priorities, as M&A appetite remains high over the next 12 months.

Divestitures will be a critical component of successful portfolio transformation as executives look to raise capital to fund technology-driven mergers and acquisitions changes.

Nearly a third of executives have increased the frequency of portfolio reviews in the past three years. Digital transformation is driving this accelerated frequency. The opportunities offered by new technology, as well as the threat from their more digitally savvy competitors and startups, are driving transformation plans. Boardrooms are also looking at the increased competition driven by sector convergence and technology-enabled changes to established business models.

With the economy improving, credit still freely available and corporate earnings at record levels, executives are making the hard decisions now to better equip their businesses for the future.

The actions taken by executives after their most recent portfolio review clearly signal that acting at speed is critical. Almost three-quarters (74%) expect to achieve their objectives within 12 months. Of those actions, more than a third (39%) identified an asset at risk of disruption to divest, and another third (32%) identified an underperforming asset to divest.

Current dealmaking conditions make this an opportune moment to divest. What may not suit one portfolio may be an ideal fit for another. There is also a healthy appetite by private equity (PE) to acquire selected divested assets.

However, with divestitures especially, the balance between speed of decision and execution needs to be judged finely in order to extract the most value and lay the foundation for future success. And as with the wider boardroom agenda, capital released through divestitures can be recycled into both existing operations and in M&A.

What is your perspective on the global economic growth?

Q: Are you reviewing your portfolio more frequently than three years ago? If yes, what is the key reason for reviewing your portfolio more frequently?

What is your perspective on the global economic growth?

Q: What are your main strategic drivers for pursuing acquisitions?

Human capital transformation: changing business models and a new, more flexible labor environment still being resolved

As portfolios and business models become more agile, fluid and responsive to change, the challenges in securing the right mix of workers are greater.

Companies are becoming more dependent on nontraditional forms of labor, particularly contractors and contingent workers. Determining how to best utilize contingent workers and integrating them while retaining corporate culture is the most pressing workforce issue executives face.

The increasing use of more flexible workforce models raises complex issues and may expose companies to financial and reputational risk. The need to protect intellectual property (IP), maintain continuity of operations, and build and retain institutional knowledge also comes into play.

However, in many leading economies, there are record levels of employment and generational lows in unemployment. More than half of executives (55%) are struggling to identify and hire people with the right skills.

Many are reskilling their existing workforce to better respond to technology changes as a result. But this can be a challenging transformation — contingent workers may be needed to accelerate the process.

What is your perspective on the global economic growth?

Q: Which of the following workforce issues is your organization encountering?

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Summary

Companies are shifting their M&A outlook to prioritize technology-driven agility, and with that, workforce models are becoming more flexible and responsive. 

About this article

By

Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.

Related topics Capital allocation Digital