When we first started talking about Value Creation a few years ago, we focused on the deals context: increasing the value of a business prior to a sale or acquisition, and realising the value post deal. Our report with Mergermarket, Creating value beyond the deal, found that just 61% of acquiring companies could say that their latest acquisition created value, and only one in five said that it created significant value. The opportunity was clear. Companies needed a strategic approach to ensure that every opportunity to create value throughout a deal was optimised.
Amid continuing disruption, more companies are asking what they can do to improve the value of their business as a whole and insulate themselves from future shocks.
Our advice? Whether you are seeking to cut costs, maximise the potential of your people, reinvent your business model or break into new markets, prioritise Value Creation.
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“It’s no surprise that our clients still consider Value Creation an imperative. We’re challenging them to be bolder and to look more broadly at their whole enterprise in order to succeed.”
The new value ecosystem
Shareholder returns are no longer the sole focus of a company’s value with interest returning to measures around society (purpose, ESG) and business resilience. Global Value Creation leader, Hein Marais, wrote: The increased need for resilience since COVID-19 has captured the attention of capital markets — in turn creating new imperatives for leaders seeking to build enterprise value.
A resilient organisation that can respond quickly to external shocks, flex to take advantage of new opportunities and include its broader societal impact in decision-making, is the new gold standard.
From tactical to strategic
A tactical response will only get you so far in a challenging market environment. It may be necessary in the short term – for improving cash position and reducing value destruction, for instance – but current conditions warrant a longer-term perspective.
Make it work for you
With so many variables, it’s important to tailor the Value Creation approach to each business and its circumstances, requiring a creative, collaborative approach to finding the right answer. It’s also vital to include the flexibility to adjust if conditions change.
Disruption will continue for some time yet, bringing further shocks and opportunities.Those businesses that act now to improve their value will be best placed to respond to whatever is coming next.
Whether you are seeking to cut costs, maximise the potential of your people, reinvent your business model or break into new markets, start with a Value Creation mindset. Together, we can create value.
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