Types and strategies in Corporate Development

Corporate Development teams — how do they make a difference?

Generally speaking, the key purpose of a Corporate Development team is to create business opportunities thanks to which companies can grow, improve their financial performance and remain competitive. This is often achieved by taking part in, or carrying out, certain transactions such as mergers and acquisitions (M&A), divestitures, alliances and partnerships, and more. In order to ensure the effects of such endeavors are truly profitable for the company, a Corporate Development group needs to be capable of offering strategic recommendations, based on accurate conclusions drawn from thorough analysis of markets.

Typical activities of a Corporate Development department

Certainly, the range of Corp Dev functions may vary hugely, depending on a company. Still, some common activities and responsibilities that corporate development jobs entail include:

• undertaking profitable strategic initiatives,
• identifying and probing into potential target companies, and establishing relationships with them,
• perfecting operational efficiency,
• improving customer experience,
• creating forecasts related to asset allocations,
• increasing the company’s productivity,
• managing the company’s portfolio,
• taking part in conferences and meetings to discuss the corporate strategy with shareholders and company executives.

The overview of Corporate Development strategies

Let’s have a look at some strategies that are frequently implemented with the aim of accomplishing the goals of Corporate Development.

1. M&A

   Carrying out mergers and acquisitions is considered a substantial growth-promoting factor as it allows the two companies to enter new markets, improve productivity, lower production costs, gain a competitive advantage on the market or get access to talented employees and better resources. Very often, larger companies decide to consolidate with smaller firms whose business potential can be vital in terms of stimulating growth and revenue generation.

2. Long-term partnerships

   While M&A can sometimes pose many challenges, engaging in long-term strategic partnerships is likely to be easier for organizations, while still remaining highly beneficial. Stable relationships are likely to provide all the partners with considerable financial advantages resulting from large scale production, help avoid or end price wars, and give the companies access to new customer bases and previously unexplored markets.

3. Strategic alliances

   Strategic alliances (e.g., geographical or sales alliances) are perceived as a good way of helping companies manage risks, make efficient use of their assets, get into new markets (especially the emerging ones, e.g., India or Brazil) and quickly get a grasp of the practices that are relevant to a particular business environment.

4. Divestitures and carve-outs

   As capital raising remains a significant goal of every success-oriented company, divestitures and carve-outs have become one of the eagerly adopted strategies. The reason for this lies in the fact that a well-planned disposal of the company’s assets or business units can help the company obtain new funds, reduce the amount of debts or simply focus on the most profitable units (by selling the redundant ones) in order to increase operational efficiency.

5. Joint ventures

   A joint venture — i.e., a new company founded by two or more parties whose common goal is to accomplish a specific task — is another strategy that provide the venture partners with major benefits, such as access to a wider and more diverse range of resources and technologies, costs distribution, or reducing the risk of failure. Also, there is a degree of flexibility that allows each of the companies to maintain its own identity.

Types of Corporate Development teams

When it comes to how the teams are structured within a company, we can point out the three main models of Corporate Development.

Centralized model

This model is definitely the most frequently occurring one. Performing the centralized function makes it possible for the Corp Dev team to see a big picture of what is happening in the company. This means that they are able to quickly spot – and act upon – not only opportunities for growth, but also threats to the fluency of the company’s development. This model also facilitates M&A activities that might be part of the company’s strategy, as it allows for structuring deals between the acquiring company and the acquired one.

Decentralized model

This means there is no dedicated, central Corporate Development team in the company. Consequently, in case the need arises, the company has to build up a team of professionals from various internal departments; the choice of those individuals is based on what kind of expertise is considered the most relevant to a particular project. Some projects may require members with legal background, investment banking experts, or corporate governance or corporate finance professionals.

Hybrid model

This model combines some elements of both the above-mentioned models. The Corp Dev team typically consists of only several professionals and has rather limited resources, which is why it needs to rely on other departments when some additional expertise and resources turn out to be necessary.

Promoting business development

All the functions Corporate Development teams have to perform and all the activities they carry out on a daily basis calls for extensive industry knowledge, a strong understanding of business valuation techniques, experience in finance, and good analytical and communication skills (to name just a handful of skills and abilities). If the company wants to discover new business opportunities and gain more economic leverage, such professionals may prove to be of extreme help.