If your subsidiary, unit, or plant is underperforming the budget, burning cash, or pulling your whole business’s P&L down, you need to evaluate your strategic opportunities with this asset. We approach this topic as if it were an acquisition project in reverse. A deep dive analysis into your strategy, the asset’s role in it, and the business performance (financial, operational, growth potential, and challenges) will reveal the Performance Gap between where the asset is and where you want it to be.
Our critical goal of this due diligence-like approach is to clearly identify and understand the underlying reasons for the existence of the Performance Gap. We answer questions: What is the realistic trajectory of the asset? Is it self-sustainable from a cash perspective? What is the most critical set of problems? Is it a local market? May it be an inadequate product portfolio or customer segmentation? Is the business lagging behind the technology of the competition? Do too high costs drive the underperformance? Is there a lack of operational excellence, productivity, or efficiency in using the equipment setup?
You will know where the problem exists with your underperforming asset, and the reasons why. We will provide clear guidance on what you can do with it!
The goal is to provide you with actionable insights and lead you towards the decision to be made about your strategic initiative with this asset. We will outline three potential choices:
I. Fix – in the case that the Performance Gap is “closable” and we identify available resources (within your organization and the local business and team), with a reasonable likelihood of success. We will also outline the performance improvement framework necessary to close the gap and set up the business for future success. In the context of your strategy, the capital costs, and alternative strategic initiatives that you could undertake with the same internal resources, this option needs to bring more long-term value to you than the other two options.
II. Sell – in the case that the Performance Gap is “not closable”, (i.e., if we identify that either your organization, or the local business and the team, do not have resources, time, capabilities, or market potential to deliver the necessary turnaround that will benefit your long-term strategy), we will perform a valuation exercise to estimate the potential market value of the asset.
III. Cease – in the case that the Performance Gap is “not closable” and the asset cannot be sold at a reasonable price, or potentially at all, we will outline the scenario where the operations are stopped, capital is preserved, cash is realized, and released to you for further investments in other opportunities.
We will always make our recommendation considering the asset’s business performance, macroeconomic conditions, industry niche cyclicality, available resources, and the existing challenges of the Performance Gap. Such advice will always be made from the perspective of maximum long-term benefit for your strategy.
The scope, length, and content of the work are flexible to cater to the needs of the project and a clear target to deliver three options with an assessment of their implications, leading to the ultimate recommendation. The reports can be segmented or delivered together and can vary in length. They will be accompanied by an underlying spreadsheet data analysis, and we will prepare Boardroom Summaries at every junction point, when you need to seek the approval of the Supervisory Board or an Investment Committee.
