How CEOs can embrace transaction-led transformation
EY-Parthenon listed three actions that CEOs can do to transform their portfolios.
Five out of 10 CEOs in Asia-Pacific said that they will actively pursue joint ventures or strategic alliances as their top transaction initiative over the next 12 months, according to EY-Parthenon’s Global CEO Confidence Index.
This was followed by divestments, spin-offs or initial public offerings, and mergers and acquisitions (M&A), with 42% and 39%, respectively.
To ensure that CEOs capitalise on transactions to transform their portfolios and enhance future value creation opportunities, the report suggested three actions that they should do:
Continuous portfolio optimisation
According to EY-Parthenon, CEOs should establish a continuous process of portfolio optimisation, where the performance of each asset is regularly reviewed against the company’s strategic goals. This proactive approach allows for timely adjustments in response to market changes, technological disruptions, or shifts in consumer preferences.
By continuously evaluating and adjusting their portfolio, they can identify new opportunities for value creation, such as investing in emerging technologies or entering into strategic partnerships, to maintain a competitive edge and drive long-term growth, it said.
Incorporate flexibility in deal structures
EY-Parthenon said CEOs should structure transactions with greater flexibility to accommodate different outcomes. This might involve adjustable pricing mechanisms, earn-outs or clauses that allow for renegotiation based on future events.
This flexibility can protect the company from adverse developments whilst allowing it to capitalise.
Scenario transaction decision-making
Scenario planning provides a framework for CEOs to test the robustness of their transaction strategy against various futures and aid in making strategic decisions that are resilient to a range of possible market conditions, EY-Parthenon said.
By preparing for multiple outcomes, they can make more confident investment and divestment decisions, knowing they have considered a broad set of possibilities and developed strategies to address them, the consulting firm said.
