Corporations, by nature, are profit-driven and are always looking to create wealth for their shareholders and stakeholders. Decisions on how to accomplish this usually fall under the heading of corporate development. Yes, corporate development is a broad term, one that encompasses a lot.
What Is Corporate Development?
Growth is success, and as mentioned above, corporations have a responsibility to grow and remain profitable. Easy to say, but in this fast-moving world where keeping pace with the competition isn’t enough to ensure success, long-term strategic development is mandatory.
Corporate development is the planning and execution of strategy to meet the goals of the organization. It is a very broad umbrella, which covers internal topics such as management, recruiting and corporate finance, as well as more visible areas such as products and/or services that are offered, strategic alliances and intellectual property. In short, it’s about making the big decisions for the company that will help its future success.
Why Is Corporate Development Important?
Corporate development is all about the strategy of a company. Corporate development heightens a company’s value and organizational efficiency and will ultimately bring value to the shareholders and stakeholders.
Types of Corporate Development
There are three basic types of corporate development. They are the following:
- Management restructuring: Changing the structure of the company’s management is one of the popular strategies of implementing corporate development.
- Corporation growth: This involves looking to increase revenue by analyzing the products and services offered, considering the revision of current offerings, changing the pricing structure, or trying new marketing strategies.
- Specialist implementation: This involves “calling in the experts,” usually consultants who can research the business and recommend one (or more) strategies that will help the company attain its goals.
Mergers and Acquisitions
One of the standard outcomes of corporate development is mergers and acquisitions, commonly referred to as M&As. There are multiple varieties of mergers, including the following:
- Horizontal: This is when two companies that offer similar products or services, with the same type of customers, combine.
- Vertical: This is when two companies with similar goods, services and customer bases, but who are at different stages of production, merge.
- Conglomerate: This is when two dissimilar companies, whether with products, services, customer bases or geographical locations, merge.
An acquisition is when one company swallows up another one. Similar to mergers, there are several varieties of acquisitions.
Beyond the Realm of M&As
However, there are more options beyond the standard M&A strategies. These include the following:
IPO: An initial public offering (IPO) is a common way for companies to raise money from public investors. Almost always underwritten by a financial institution, an IPO allows the company to be listed on one of the stock exchanges.
SPAC: A SPAC (special purpose acquisition company) is a shell company with few or zero assets. The purpose of the newly created company is to raise capital, perform a hostile takeover or to go public, an alternative to the standard IPO. One of the benefits of employing a SPAC is the shortened time to be listed on the exchange.
There are several ways to determine if your corporate development strategy was a success. These include the following:
- Return on investment (ROI): The ROI is the net profit over a period, compared to the cost of investing in resources.
- Net present value (NPV): This is the current value of cash inflow compared to the current value cash outflow in the same time period.
- Revenue growth: This is a solid indication of whether the corporate development strategy is successful.
- Synergistic effect: This indicates whether the synergy of the M&A has a positive impact on the company’s stock.
Where a Virtual Data Room Fits In
A Virtual Data Room (VDR) is a necessary component when it comes to any M&A, IPO or SPAC transaction, as well as a necessary component to virtually every type of corporate development strategy. A VDR is a secure online repository where companies can store, share and edit all the documentation that is needed during all phases of the transaction.
For corporate development transactions, a trusted VDR provider like Caplinked employs all the necessary tools that are required — secure access, enterprise-level encryption, multiple layers of security, version control and user-friendly admin controls that allow assigned users to seamlessly upload and download documents. Caplinked, an industry leader in the VDR space, can help streamline and save time and effort when it comes to performing corporate development strategies. To learn about Caplinked’s advanced management features, document collaboration controls, customizable permissions and more, contact Caplinked today to start your free trial.
Chris Capelle is a technology expert, writer and instructor. For over 25 years, he has worked in the publishing, advertising and consumer products industries.