Organizations need to manage today as much as prepare for tomorrow. There is greater confidence in global economic growth than at any time since the global financial crisis. This welcomed and long-awaited scenario creates new intense expectations. It requires an even keener focus on organic and inorganic growth, as well as cost efficiency to meet rising investor demands.
Virtually all of the US companies represented in our 17th semiannual Capital Confidence Barometer said they engage in regular portfolio reviews – nearly half do so annually – indicating that companies are employing every tool at their disposal, from divestment to cross-sector partnerships, to stay competitive in these relentlessly disruptive markets. Moreover, for the largest companies, M&A remains front and center: three-fourths of companies with revenue of US$5 billion or more are planning deals.Below we highlight key findings of the survey and offer a few questions for boards and management to considered drive better M&A in today’s deal economy. You may also want to read the full US summary.
Key findings of the 17th semiannual Capital Confidence Barometer
Taking advantage of a broad-based recovery in global economic growth to boost near-term earnings …
Questions for management and boards to consider to drive better M&A in today’s deal economy
- Are you able to take near-term advantage without losing strategic discipline?
The near-term pickup in the global economy offers one solution to demanding shareholders. But fundamental shifts across all sectors mean that companies should be looking for sustainable long-term value creation via acquisitions, alliances and investments, as well.
- Is your portfolio fit for purpose?
In a rapidly evolving environment of disruptive change, companies should increase their ability to refocus their core assets to proactively respond to emerging opportunities. Real-time monitoring of performance across all assets will highlight where to invest as well as those to sell.
- Are activists the best warning sign for strategic reinvention?
Activists investing in a company can be an early sign of value opportunity. Companies should engage fully and early with onboard investors to understand the concerns — and be willing to pivot if required.
- Can private equity become the partner of choice in dealmaking?
With PE changing investment models, holding assets for longer and looking beyond financial engineering to operational value creation, corporates and PE should consider when to compete and when to go to market together on deals.
- Do you know who will be the main competition in the future?
Technology, digital and customer demands are accelerating sector convergence and inventing new markets at an increasing pace. But technology is just a gateway. Understanding these new ecosystems in real time is critical. Companies should identify potential new partners and targets early enough to ride the new waves of value creation.
- Are you open-minded to multiple futures, without being constrained by outdated thinking?
New industrial landscapes and business models are evolving and morphing. Companies should consider using corporate venture capital to invest in portfolio start-ups and disruptive challengers to open up a variety of potential avenues of future growth.
- Is your growth inclusive?
The corporate world has been reinvented over the past three decades. Globalization and technology have reshaped the workplace. Companies will need a well-articulated inclusive growth strategy and narrative to demonstrate that value is being created for all stakeholder groups. If they do not, they risk a backlash from customers, communities and policy makers.
- Do you have a global mindset?
Fears over potential trade barriers, driven by economic nationalism, may appear to undermine globalization. But with supply chains and customers increasingly global, companies should be even more open to cross-border operations.