Dynamic Portfolio Strategy and Capital Allocation for higher shareholder returns

case studie Portfolio Strategy

An industrial player in the biopharma market with multiple businesses maximizes its returns by rethinking and implementing an optimal portfolio strategy.

A large industrial group with multiples products' and services' businesses - encompassing equipment supply, raw material supply and manufacturing services - asked Larka to develop a dynamic and value-creating strategy to optimize its portfolio's performances.

Indeed, top performers relentlessly reorganize their business portfolio, continually moving with the market towards new opportunities for value creation, and divesting businesses that are not aligned anymore with corporate strategy or underperform. However, driving a portfolio in the right direction requires a deep experience of the industry and its intricacies as well as advanced analytics and insights that support the strategic decisions.

During an 8-month mission, we worked hand in hand with our client to rethink and develop an optimal portfolio strategy. Success in portfolio management essentially lies in the ability to balance investment opportunities against supply of capital and risks, given the forecasted returns of current investment and synergies between each individual business in the portfolio.

First objective of this project was to understand the group's growth objectives as well as the shareholders expectations, and to assess the alignment between those objectives and expectations with business units' performances, value potential creation, and synergies.

Our experts proceeded to an in-depth analysis of each unit's growth and profitability, organization structure and capabilities, competitive and customer environments and related market dynamics as well as connections and synergies with other units.

This work allowed us to identify priorities for investments, but also a candidate for divestment.

Indeed, we were able to define the value creation roles of the different businesses in the corporate portfolio. We compared data on each unit and identified which businesses would be the future growth engine of the company, which ones would supply cash for other businesses to invest and where divestment should be considered. Market analysis, and assessment of our client's value chain and supply chain, also allowed to develop a compelling 3-year M&A plan, as several companies on the market had strong value-creating synergies for the whole portfolio.

On the next phase of the project, Larka prepared a blueprint for each business unit with budgets, planning cycles, objectives and KPIs depending on the unit's performance, value potential and role in the portfolio. We defined a clear and value-creating roadmap for their portfolio of businesses aligned with the company's ambition.

Larka also supported the decision to divest one of their assets as it was a value creation break, receiving inappropriate investment and attention, and consequently delivering poor performance for the whole organization.

This divestment improved the performance and profitability of the remaining operations, while generating substantial cash at the time. It also allowed to increase management focus on the remaining businesses, with more funds to be invested and a better capital allocation.

This 8-month project lifted the overall growth and profitability of the portfolio, with a 17% EBITDA increase over the three years that followed our mission, and a 21% annual revenue growth.