An international supplier of polymer and specialty products wanted its stock price to provide a P/E ratio equivalent to that of its valuation peers.
Challenge: CRA initiated a portfolio management and corporate growth strategy process to place our client in the targeted stock price range. The first step of this process was to carry out a portfolio diagnosis to evaluate each business unit base growth and performance metrics. We segmented the client’s businesses into growth, core, and restructure based on historic earnings contribution, forward-looking earnings contribution potential, and linkages with the rest of the portfolio. CRA performed a valuation to estimate the contribution from portfolio management and to identify the value gap to achieving higher valuation, tying the portfolio management process to shareholder value targets. After identifying the main value drivers, we identified the necessary growth-related activities to achieve the targeted valuation and an appropriate timeline for each activity.
Result: The portfolio management process identified the necessary strategic actions for each segment (growth, core, restructure) and the timeline in which the strategic actions should occur. CRA consequently worked with the business units in the growth segment to build robust business unit strategies with clear growth initiatives that will enable the type of product line and regional growth the company needs to reach its target P/E valuation. Our work has created significant shareholder value for our client.
The Convergence of Financial and Societal Value, and What It Means
In this Marakon Commentary, Charlie Johnson and Christine Delivanis discuss how until very recently, the market and society more generally were less aware of...