Reshaping your business
Nothing lasts forever. Any business model, no matter how good, will some day need to be tweaked, revised or scrapped. And once in a generation, economic disruption may create the imperative for organizational change across the economy as a whole.
For many companies and private investors, that moment is here. The global downturn has produced flux and uncertainty. Distress, bankruptcy or other trauma are forcing many business leaders to reinvent their organizations in order to stay in the game.
Reactive change, however, is only part of the story. Across the economy, forward-thinking executives are reviewing the operations and goals of their enterprises. Many believe that the significant shifts seen lately in consumer spending, supply and government involvement will persist well beyond any recovery. These leaders are mapping out new strategies proactively, before circumstances force them to do so — perhaps at a time when they may have fewer options.
“Reshaping your business” is the theme of this issue of InterChange. It is a broad topic: opportunities to reshape are available to companies across the stress pendulum (page 3). The specific actions vary widely, depending on industry sector, location on the cash earn-to-burn continuum, capital profile, growth prospects and many other variables. A close look at current operations, markets and products is a good place to start (page 2).
Transformation requires innovation — not always plentiful in large organizations that have been successful for many years. However, a group of exceptional smaller companies, winners and finalists for the Ernst & Young Entrepreneur of the Year Award, are using leading-edge organic growth and transactions to seize what they see as tremendous opportunity in today’s economy (page 4).
Hot growth companies aside, transactions remain few and far between — despite a huge supply of private, corporate and state capital waiting in the wings. Buyers and sellers continue to vie over the price-bid gap, but holding out for better days may mean missing out on critical opportunities (page 5). Private Equity (PE) has slowed exits for instance. Even so, the latest update to Ernst & Young’s study, “How PE creates value,” continues to show the strength of the PE model in Europe (page 6).
As companies drive toward change, emerging markets loom large in their plans. India’s continuing growth and increasingly hospitable policies put this country on many lists. Investors should understand, though, that India is fast outgrowing its image (page 7). Outsourcing is less important at home, while abroad, strong Indian companies are competing for global M&A. Such dynamism in the face of global economic uncertainty is just another reason to consider reshaping your business.
Richard Jeanneret •Americas Vice Chair Ernst & Young LLP (US) •New York
Transaction Advisory Services
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