Capital allocation, be it investment in new markets, new products or acquisitions, often represents the signature, transforming achievements of a CEO. Yet institutional investors often list capital allocation as the great weakness of listed companies, demanding cash be paid out instead in the form of dividends or buy-backs, restricting the growth of their investments.
We work with Boards and senior managers to build a greater understanding of the perspective of institutional investors with respect to capital allocation and outline what needs to be done to build the case for growth.
We review investment opportunities and assess in detail the likely impact they will have on the value of the company if delivered. We examine the underlying economics of the investment case and work with managers to assess the reasonableness of those forecasts, based on the business’ competitive landscape. We then help refine the investment plan and identify key drivers to manage to optimise the impact the investment will have on the value of the firm.
Our recommendations are informed by our database of the economic profitability of over 300 of Australia’s largest publicly listed companies.
For more on our thinking on capital allocation click here.