A valuation workshop for the leadership group of a listed multinational

The challenge

The CEO of an ASX 50 multinational asked us to boost the understanding of valuation issues among his most senior managers and demonstrate the impact their actions could have on the value of the firm.

The aim was to not only inform and build a common understanding of valuation matters, but to bring greater relevance to the group’s long term (equity based) incentive plan, which many managers said was more of a lottery ticket than an incentive.

How we responded

We worked closely with finance and strategy staff to prepare value driver trees for each division, linking return on capital employed and economic profit to key performance indicators that managers were used to, such as volumes, prices, margins and stock turns.

At the Group’s annual retreat for its 100 most senior managers we presented the highlights of our research into the key drivers of wealth creation in the Australian equity capital market, including the expectations for our client and outlined what level of performance would be required to justify a significant re-rating of the stock.

We then broke into groups of 7-10 managers and walked through the value driver trees, challenging them to identify the key drivers of changes in performance in their division over the past five years.

Finally we asked, ‘What would it take to significantly increase the value of the company over the next three years?’  The teams had to develop solutions mapped out in terms of key drivers, but also identify the key blocks to those changes and how they might be addressed.

The session concluded with managers presenting and discussing their findings with the wider group and the CEO and strategy team pulling together the findings to reinforce the key strategic focuses of the business.

The results

The result was a senior management team better equipped to think through and discuss the key drivers of company valuation, excited by the opportunity with a reinforced understanding of how the chosen strategies of the group will deliver for owners.