Portfolio analysis
Portfolio analysis serves as a tool for strategic planning when drafting a group strategy
We help you to determine the strategic agenda for corporate value creation with priority on the following questions:
- Business portfolio – What businesses are we in?
- Parenting style – How do we create value for the businesses?
- Corporate control – How do we control the businesses?
The importance of portfolio management is emphasized during uncertain times
In business, a portfolio refers to a group of different businesses in which an organization has invested or owns. Company’s portfolio may have been established for a number of reasons. During uncertain times, business leaders need decision-making tools to help them navigate through challenging times. Portfolio analysis is one of the well-established strategic planning tools used by the company’s key personnel, which enables the company to build its future on a sustainable basis in a changing environment. The business can be developed in several ways in the future; through organic growth, exploiting existing capacity, making acquisitions and divestments, partial discontinuation of production, various forms of cooperation, etc.
The goal is to develop shareholder value
Developing long-term shareholder value is at the heart of portfolio analysis. The analysis can be used to determine the value of the holding, which can be compared to the group’s market value and the potential value adding potential can be detected. In general, traditional metrics such as ROI or EPS are not reliable metrics of added value.
In the figure below, the organization is divided into smaller strategic business units (SBUs). Analysis helps to define shareholder value. Shareholder value can be compared to group market value and detect potential for value creation.
Portfolio analysis provides the basis for defining a portfolio strategy. Portfolio analysis provides answers to the following questions:
- Which business units create the greatest shareholder value?
- Which business units have a limited value creation ability, and which ones could be potential divestments targets?
- What kind of a strategic combination between units creates greatest additional value?
- In which way and to what extent the company can finance the proposed strategy with funds generated by operations, and how much debt or equity is needed?
In portfolio analysis, CAG utilizes both classical portfolio analysis models and the latest research trends. Portfolio analysis is always tailored on a case-by-case basis. Several listed companies, as well as smaller players from different industries, have utilized CAG’s portfolio analysis in their decision-making process.
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Corporate Advisor Group Oy