At the same time, successful companies periodically make critical assessments of how their existing investment base (portfolio) is deployed, to see if the actual performance and outlook for the individual products, services, and business segments warrant continued commitment within the context of the company ’s
strategic posture. If careful analysis demonstrates below-standard economic results and expectations about a particular market or activity, then the opposite of investment, disinvestment, becomes a compelling option. As we ’ll see, such poor performing activities destroy shareholder value. Disposing of the assets involved or selling the operating unit as a going concern will allow the funds received to be redeployed more advantageously elsewhere. Also, the sale of any equipment being replaced by newer facilities will provide funds for other purposes. Shareholder value creation thus depends on a combination of ongoing successful performance of existing investments, and the addition of successful new investments —a continued reassessment of the company’s total portfolio of activities.
At the same time, successful companies periodically make critical assessments of how their existing investment base (portfolio) is deployed, to see if the actual performance and outlook for the individual products, services, and business segments warrant continued commitment within the context of the company ’s
strategic posture. If careful analysis demonstrates below-standard economic results and expectations about a particular market or activity, then the opposite of investment, disinvestment, becomes a compelling option. As we ’ll see, such poor performing activities destroy shareholder value. Disposing of the assets involved or selling the operating unit as a going concern will allow the funds received to be redeployed more advantageously elsewhere. Also, the sale of any equipment being replaced by newer facilities will provide funds for other purposes. Shareholder value creation thus depends on a combination of ongoing successful performance of existing investments, and the addition of successful new investments —a continued reassessment of the company’s total portfolio of activities.
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