STRATEGY CONSULTING GROUP

 
 
              SCG

CORPORATE FINANCE & DEVELOPMENT

Corporate Finance is an important discipline in the execution of corporate strategies. SCG increasingly has become a partner of choice in designing and implementing holistic value-creation strategies, as well as in developing world-class finance functions.

 

Our understanding of value-creation strategy entails adopting an explicit value-creation target as well as designing and aligning business, financial, and investor plans accordingly. We thereby help companies understand their sources of valuation advantage and increase returns to shareholders.

 

Financial management, budgeting, and reporting include all the elements needed to generate a world-class finance function. This function faces special challenges attributable to increasingly complex demands such as driving value creation, facilitating strategic decisions, and providing transparency in external reporting.

 

A value-creation strategy requires development of sharply defined and closely aligned business, financial, and investor plans to optimize total shareholder return over the medium to long term at both the corporate and business unit levels.

 

Financial management, budgeting, and reporting include all the tasks chief financial officers need to create a successful finance function—from redefining the role of the finance organization to improving its design and core processes, such as planning.

 

Value Creation

To create sustainable, long-term shareholder value, it is important to explicitly establish an appropriate shareholder value target. The key to reaching this target—and achieving a competitive advantage—is the alignment of business, financial, and investor strategies. Therefore, companies must ask the following important questions:

  • How can we pressure-test financial policies to ensure that we have the right capital-structure, dividend, and buy-back policies? Are those set up to weather financial storms?

  • What is my shareholders’ investment thesis?

  • Are my strategies aligned to target the right investors—those that will support my medium- to long-term business and financial strategy?

  • Will my plans create enough shareholder value to reach my targets? If not, which moves should I consider to close the gap?

 

SCG works with clients to optimize medium- to long-term total shareholder return (TSR) at both the corporate and business-unit levels. We distill investor insight from structured interviews with a significant portion of the client’s shareholder base. Through proprietary regression techniques, we identify and assess the relevance of the company-specific valuation drivers and benchmark the results against those of peers.

 

On the basis of this knowledge, we help our clients pressure-test and reshape their financial policies around the use of cash, dividends, and share buybacks. We also challenge and refine business plans with clients to achieve the targeted TSR, and we help develop alternatives to the base plan that deliver stronger TSR built on different combinations of business, financial, and investor strategies. In some cases, our holistic approach has yielded a TSR improvement of 25 percent.

 

Financial, Management, Budgeting, & Reporting

Today, chief financial officers (CFOs) face the challenge of coping with increasingly complex demands on the finance function: providing transparency in external reporting, driving value creation, and facilitating strategic decisions. To successfully meet these demands, CFOs need to create a "world-class" finance function that aligns corporate, financial, and investor strategies. As part of this process, they need to answer some key questions:

  • How should I define the role of my finance function?

  • How can I best identify and manage strategic, operative, and financial risks, especially in times of crisis?

  • How can I build and sustain a world-class finance function with benchmarking processes in each department?

  • How do I increase the effectiveness of management reporting to best facilitate strategic decisions?

  • How do I install a value-creation system throughout the organization?

 

SCG’s work with clients on the CFO function is based on our extensive knowledge and research activities, as well as on our project experience with many companies around the world. Combined with our unique strategic perspective and broad understanding of the finance function, these help us develop tailor-made solutions that create lasting value.

 

We pay particular attention to the specific requirements of our clients, because the finance organization needs to reflect both management culture and the relationships between a company’s corporate center and its business units. In this way, SCG supports CFOs in redefining the role of the finance organization while also improving its design and core processes.
 
 

Corporate Development encompasses the various facets of the corporate portfolio, growth, and strategy.  Successful companies regularly revisit their corporate and portfolio strategy to understand the drivers of advantage and identify attractive avenues for future growth. A mergers-and-acquisitions (M&A) strategy that is well thought out can be a source of competitive advantage and is an important part of any company's long-term value-creation plan. As more and more companies take a systematic look at their corporate portfolios, divestitures—the selling off of pieces of the portfolio—are quickly rising to the top of the corporate agenda. Especially when a company pursues opportunities for growth in uncertain situations, joint ventures and alliances become an increasingly important—and complex—part of corporate strategy.

 

Mergers & Acquisitions

M&A strategies involve regularly identifying attractive growth avenues through a carefully developed long-term value-creation plan and management of the end-to-end transaction process, from target screening to final integration.

 

Despite research showing that most mergers and acquisitions (M&A) fail to create value for the acquirer's shareholders, they remain an important part of any company's long-term value-creation strategy. The benefits of a well-thought-out M&A strategy can be a source of competitive advantage—especially in turbulent times. There are several key questions companies should think about as they define their approach to M&A:

  • What levers can I pull to create value from the acquisitions I pursue?

  • How can I take advantage of the current market conditions through M&A transactions?

  • How can I identify untapped opportunities in developing markets?

  • How do I manage the execution of the deals I pursue?

  • How can I make M&A an integral part of my strategic planning?

 

SCG operates as an objective, fact-based partner that can help ensure a company's M&A plan is the result of a carefully developed corporate strategy—not simply a reaction to external pressure to do a deal. Our approach is strategy driven, not deal driven, and we reserve the freedom to say no to a deal. We support our clients during every step of the M&A process:

  • Developing the strategic logic for acquisition

  • Screening potential targets

  • Estimating likely sources of value creation

  • Providing support in the negotiations, bidding, and final decision (including legal and regulatory requirements)

  • Implementing the subsequent postmerger integration


Divestitures

Divestitures entail taking a systematic look at the corporate portfolio to determine which businesses no longer fit the strategic agenda of the company and subsequently pursuing the best approach for selling them.

 

Both in periods of economic growth and downturn, more and more companies are taking a systematic look at their corporate portfolios. As they do so, divestiture, or the sell-off of pieces of the portfolio, is quickly rising to the top of the corporate-finance agenda. This is leading companies to consider a number of important questions:

  • Which businesses should I think about exiting and why?

  • Which is the best divestiture path: trade sale, private-equity sale, management buyout, or initial public offering?

  • Who would be the best buyer to ensure maximum value realization?

  • How can I attract that buyer with a compelling equity story and defendable business plan?

  • How can I manage the divestiture process to shield the day-to-day-business from transaction turmoil?

 

SCG works with companies to ensure that their decisions to divest are based on a clear strategic rationale and sound principles of value creation. We ground all of our work in a company's portfolio strategy, determining which businesses do or do not fit. We also advise on the best approach to divestiture—for example, whether to sell directly to an industrial or private-equity buyer or to float shares of the new entity through an initial public offering.

And we use our experience in literally hundreds of transactions to help clients develop a compelling equity story, negotiate with potential buyers, and manage the entire process of divestiture preparation and execution.


Alliances & Joint Ventures

Alliances and joint ventures nclude defining the strategic rationale of a partnership, identifying its appropriate organizational and governance structures, and managing it stringently to achieve the desired goals. 

 

Alliances have become an increasingly important—and complex—part of corporate strategy. They can be extremely useful in uncertain situations and in pursuing growth opportunities. But the advantages of shared risk are often offset by unclear governance and lack of genuine commitment, leading to several important questions:

  • In which areas—geographies, product lines, or functions—might an alliance or joint venture make sense? Is it better than an outright acquisition?

  • For a given opportunity, who are the right potential partners?

  • How can we prepare for alliance or joint venture negotiations—for example, for value capture and split?

  • How can we ensure constructive management and decision making in the alliance?

  • How can we set up an active joint-venture-and-alliance portfolio-management process for evaluating strategic options?

 

Not all alliances are created equal. Depending on a company's strategic goals, different kinds of alliances and different organizational structures may be appropriate. SCG works with its clients to find the best way to structure and manage their alliances and partnerships to achieve the strategic goals of the venture.

Alliances can be notoriously difficult to manage. We help companies put a structured process in place, covering every step of alliance development:

  • Defining the explicit role of alliances in their strategy

  • Identifying appropriate partners

  • Structuring the right kind of relationship

  • Managing the relationship over time—including the eventual end game