The team first determined the company’s value on the basis of the internal cash flow, and compared this with the market value. This first step revealed whether investors value the company differently from its management, and whether there is a lack of information from their point of view.
The next steps were to review, together with the top management, operational approaches for enhancing the company’s value. Options included the reduction of overheads and making more efficient use of capital.
The team also helped in identifying external means of increasing value. Among the possibilities were mergers, acquisitions, strategic alliances and the disposal of non-core activities. In a further step, new long-term growth opportunities were explored such as capturing new markets outside of the traditional business.
Additional value increasing potential was accessible through financial engineering: for example, changing the financing structure could optimise the cost of capital.
When all possibilities for increasing the company’s value were analysed and combined into a package of measures, the team knew the optimum value that the company could achieve in the market. This turned out to be significantly higher than the current market value.
