Corporate Development or Corp Dev refers to a group at a specific corporation that takes responsibility for strategic decision-making that can ensure business growth through acquisition. They help to gain organizational excellence and strategic partnerships.

With growth of many businesses, implementing M&A, Corp Dev teams are increasing at different companies. Additionally, the Corp Dev officers play larger segments in the companies. Hence, on all sides, it has become important for practitioners to understand the strategies, organization and purpose of Corp Dev teams. They focus on finding different ways to add value as well as grow to an organization. They continue transactions such as strategic partnerships, divestitures,  joint ventures, and M&A. 

The requirement of Corp Dev includes creating opportunities for a company through different actions, for example, divestitures, and startup acquisitions that can leverage the organizational value of the business platform. Here, we are going to discuss how the extended corp dev function works.

Corp Dev is required to make as well as execute innovative strategies, helping a company harness its a competitive advantage-

Enable the organization to outperform the competitors 

• Improving the operating and financial organizational performance 

• Boosting customer experience 

• Portfolio management 

Corp Dev works as an important inward-looking function for a company. You need to fill gaps in the product portfolio and geographical outreach of the company. In contrast, while acquiring startups, Corp Dev works as an important outward-looking function as companies are dynamic enterprises, with important assets, that can be grown and monetised with the help of different partnerships and dealing combinations. In this way, the Corp Dev department is important to innovate and make different transaction alternatives and business partners. 

The Corp Dev teams take responsibility for different functions; however, these functions can differ from one organization to another organization.  These teams are not limited to M&A, but specifically at wide corporations. In the work profile, some common responsibilities are-

Investing and analyzing new strategic decisions (they encompass acquisitions, mergers and different strategic divestitures)

• Gaining operational excellence

• Making forecast budgets and models to determine different allocations of assets and monitor the organizational performance

• Dealing with industry and government regulators

• Ensuring capital adequacy

• Improving customer and client experience

• Addressing and handling different non-core assets of business

• Understanding important drivers of expenses and revenues, addressing important KPIs or Key Performance Indicators to evaluate and measure organizational performance

• Portfolio management

• Pipeline management 

• Additional activities, related to M&A (integration, diligence and negotiation) 

• Market penetration and product development 

These activities are included in the work profile of a Corp Dev team.

●        Long-term Partnerships

When a company has the reputation of being a “partner of choice” in the marketplace, it can provide a competitive advantage. Stable partnerships comprise different organizations and provide all partners with economies of scale. Besides, to avoid a race or price war with a competitor, organizations prefer partnership establishment with them.

●        Mergers and Acquisitions

Large enterprises often buy or acquire smaller firms that have sufficient earnings, revenues, customers, knowledge and cash flow, significantly benefitting the acquiring organization. On the other hand, early stage startups acquire small firms that have the potential and can revamp the business model if it can be taken in a new, profitable direction. Corp Dev professionals carry out these acquisitions with their knowledge of risk management, integration, negotiation, financial modeling, and corporate valuation.

●       Carve-outs and Divestitures

Organizations face both external as well as internal pressure to ensure that company portfolios are using their capital efficiently. Due to this reason, carve-outs and divestitures have become an important strategy for these organizations. In this context, offloading assets can make high returns for the organization planfully, according to regular reviews of the organizational portfolio. In this regard, Corp Dev teams use different analytical skills and financial modelling, and an understanding of the techniques of business valuation.

●       Strategic Alliances

Apart from startup acquisitions, these alliances help organisations to manage the risks in a better way, leverage assets and core capabilities and increase market entry. Strategic alliances work as prudent vehicles for entering any emerging market such as Brazil, China and India. These alliances help companies in market entry and business relationships and learn different business practices in a faster way. Besides, these alliances boost efficient capital use with investment cost sharing and risks, dispersed among partners according to the asset contribution and skill set.

●       Creative transactions for shareholder value optimisation

Hedge funds and activist shareholders often create external pressure on an organization by stating their views and preferences regarding strategic direction and organizational performance. The demands of these investors work as incentives for the Corp Dev teams to handle new deals for shareholder value optimization.

The commonly-used metrics for measuring organizational performance are-

• ROI or Return on Investment: High ROI indicates that a solid department of Corp Dev has been established. 

• NPV or Net Present Value: With higher NPV, the better Corp Dev team performance has been perceived. 

• IRR or Internal Rate of Return: With betterment of Corp Dev performance, then the margin becomes higher through which IRR can exceed the organizational required return rate. 

• Growth of revenue: This is an important metric to evaluate Corp Dev department performance. 

• Analysis of strategic factors: If a company scores high in the analysis of strategic factors, it can indicate the operational efficiency in the department of corporate development. 

• Synergy capture: If after M&A, the value and performance of the two companies can be combined and becomes greater in comparison to separate value and performance of two organizations, then it can be said that the company has captured synergy. The synergetic impacts of a deal or transaction can be easily seen in prices of stock shares. When the synergetic impact becomes positive, then share prices become high. 

• Accretion or dilution analysis: In the context of startup acquisition, if a dilution/accretion analysis proves that earnings in each share can enhance after M&A, this Corp Dev works as a good at making shareholder value. 

• Turnover of employees: By helping to make operational efficiency and business success, Corp Dev can contribute to maintaining, achieving a low rate of employee turnover. 

An effective department of Corp Dev can assess risks and value accurately, produce a great number of deals, drive a successful and optimal business strategy and acquire targets. 

The corp dev environment is always changing and adapting to fresh possibilities and challenges. M&A professionals can position themselves for success in a market that is constantly evolving by keeping up with the most recent trends and best practices.

Growthpal can provide you with the best end-to-end deal-sourcing assistance if you're trying to improve your deal-making skills and dominate your inorganic growth plan. In the context of startup acquisitions, our specialization is in making a proper M&A pipeline that can be personalized and curated by our analysts. Furthermore, we support the complete management of stakeholders that can help with end-to-end support of transactions as per requirements. So, if you want these services, you can contact us.