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  - "A View From The Investor's    Shoes"
  - Internal Capitalism Audit
  STRATEGIC ADVICE
  - Strategic Plan Evaluation
  - Capital Deployment Strategy
  - Business Unit/Portfolio   Evaluation
  - Strategic M&A Planning &   Valuation
  - Addressing & Responding to   Activists
  - Investor Communication &   Targeting
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 - Downturn Preparedness Diagnostic
  PROCESS ENHANCEMENT
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Strategic Advice: Business Unit/Portfolio Evaluation
 
 

We work with our clients to organize their strategic thoughts in regards to their portfolio of operating companies along the following dimensions: 

  1. Evaluate the Business:  
     A. Performance
   B. Competitiveness
   C. Expectations
 
  2. Align Strategies to Maximize Value  
  3. Buy & Sell to Create Value  

To help executives allocate capital and drive strategies which maximize the value of each business, Fortuna Advisors developed a unique approach to assessing the historical and projected value contribution of a company’s business units.  Total Enterprise Value Return (TEVR) is a measure of value creation that is similar to Total Shareholder Return but eliminates the impact of leverage by focusing on the enterprise value. 

  • Current Cash Earnings is the proportion of value generated from current cash flows.  Similar to dividends, this source of value reflects the cash that a business unit contributes to the corporation which can be reinvested or re-allocated to other uses.  While this is an important source of value, it is often over-emphasized, potentially leading to under-investing in strong businesses.

  • Operating Value Generation is the value generated by operating improvements reflected in changes in the Gross Business Return (GBR).  When companies improve their GBR, particularly from very low bases, this can be a tremendous source of value creation.  Additionally, improving GBR ultimately leads to improved cash generation which can improve the Current Cash Earnings profile of the company in future years.  Companies with high returns must be careful not to focus too much on protecting returns and risk passing on sound investments. 

  • Investment Value Creation is the value generated by investing more capital at returns higher than those demanded by investors.  Often, this can generate some of the most substantial value for a business with high returns, even if the returns decline slightly. 

Once the sources of value creation are identified, we work with our clients to refine the business portfolio and the strategy within each business to enhance the business’ value contribution to shareholders.  We benchmark the business units against each other and against peers.  We also compare the historical sources of value to the future forecast sources.  These analytics clarify the “meaning” of a forecast which makes it much easier to assess whether the forecast is consistent with the strategy and the trend of the business unit and its peers.

Click here for more information on our perspectives regarding business portfolios. (link to BU article)

 

 
     
 
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