For companies managing a portfolio of businesses, investment decisions are seldom clear-cut—especially when different logical rationales conflict. Managers typically make portfolio decisions based on a series of justifications. The choice to invest, cut back, buy, or exit is ideally guided by: 1. Business logic: the strength of a business’s structural attractiveness 2. Added-value logic: the potential to improve the business or create synergy with other businesses 3. Capital-markets logic: whether they are likely to over- or under-value the business relative to the net present value (NPV) of its future cash flows Want to learn more from our Corporate Finance Practice on inputs into these tough decisions? Click to read an excerpt, adapted from the new book Strategy for the Corporate Level: Where to Invest, What to Cut Back and How to Grow Organisations with Multiple Divisions (Jossey-Bass, June 2014), or to download a podcast version of the piece.
Posted on: Mon, 15 Sep 2014 18:23:21 +0000
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