Portfolio restructure for
System Processor Co., a large player in the industry with revenue of $2.1 billion, was facing a complex situation:
• projected market growth of 6%
• the top five players in the industry holding 18% of the market
• on-going industry consolidation
• asset-intensive operations
• current need for large investments moving forward
Management was unclear on how to move forward and where to invest.
Designed a strategy to unlock significant opportunity and create value for the company by restructuring its business portfolio:
• Pursue a consolidation strategy in Claims Processing Unit ($1.1 billion) through select acquisitions
– The company enjoyed a dominant competitive position in Claims Processing on which to build economies of scale through acquisitions
• Divest Financial Processing Unit ($950 million) and Payroll Processing Unit ($50 million)
– Unlock hidden value as units were potentially more valuable to other industry “consolidators”
MARKET ANALYSIS
Estimated market size
Identified segments
Forecasted growth by segment
Assessed level of fragmentation by segment
COMPETITIVE ANALYSIS
Identified leading competitors by segment
Analyzed financial performance and balance sheets
Measured segment share
PORTFOLIO ANALYSIS
Measured corporate market performance and financial performance
across several dimensions
• Growth vs. relative market share
• Cash use / generation
• Profitability vs. asset utilization
• Company growth vs. market growth
M&A VALUE ANALYSIS
• Identified potential M&A targets by segment
• Estimated potential synergies
• Measured market price
• Quantified inherent value creation/destruction of M&A transaction by target company
FINAL DETERMINATION
Determined M&A feasibility in each segment, including
• Acquisitions
• Divestitures
Identified feasible accrual M&A options
Determined ability to establish market dominance in each segment
Balanced investment requirements against company balance sheet
Consolidated findings to determine portfolio direction, i.e., acquisitions and divestments
