Managing for value
The rise of private equity seems to have increased the focus on managing for value.
The management of publicly quoted companies might be able to learn from private equity companies on areas such as strategic focus, implementation and remuneration. But they may also have the advantage over private equities because they can manage for value to maximise shareholder value in the longer term.
Asking ‘What would a private equity house do to our business?’ can help frame strategic decision making and provide this focus.
Finance/business partners can provide much more than metrics in a business managed for value. With a greater understanding of the business and its potential, they can challenge the business to accept ambitious but achievable goals.
Business partners can determine how decisions can be assessed and performance managed. They understand that the inherent risks in these expanding targets have to be assessed and managed in order to create value.
Maximising shareholder value: achieving clarity in decision making (PDF 161KB) is a CIMA technical report that describes some of the ways used to define, measure and achieve shareholder value in listed companies.
More information on this topic can also be found in further reading (PDF 56KB).
