Corporate strategy planners have never had it tougher. Companies are bracing for the worst economic year in more than a decade. Disruptive technologies and new competitors continue to proliferate. Capital markets are a storm of discontinuity, allocating capital among winners and losers, encouraging the creation of corporations, and removing them when they no longer perform.
In this environment large companies are particularly vulnerable. Even as some corporate icons have relied on their sheer size and momentum to survive, they have not created superior shareholder value. One approach to countering such turbulence, is to emulate the dynamism of capital markets within individual companies. Companies that “trade” their corporate portfolio—developing a balanced M&A program that actively allocates capital to acquire new businesses, encourages their growth, and then sloughs them off in a timely fashion—can create superior shareholder returns.
Matching the dynamism of markets in a corporate setting is not easy. But companies that pursue active, balanced M&A strategies matched to their core skills and the life cycle stage of their business units have the best chance to thrive in an ever more tempestuous market.