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HoldingCo*, a large Latin American conglomerate, owned many businesses in sectors that included fast-moving goods, packaging and real estate development, among others. The company had diversified into several non-related businesses, but had failed to achieve its profitability targets.
HoldingCo's board of investors had set a minimum return for all the companies in the portfolio, but many of them fell below their goals. A Bain team was brought in to help:
- Find a new business opportunity that could eventually replace the reliable cash generators ("cash cows")
- Define strategies for the smaller businesses ("tigers") so that they would either achieve their value creation objectives or be divested
- Clarify the strategic and operational role of the center to achieve overall growth
Bain divided HoldingCo's sustainable profit concerns into four challenges and created specific frameworks for each challenge.
Bain's first priority was to redesign the money-losing businesses, or "Tigers." Rather than divesting whole companies, we recommended that our client divest product lines. We also delivered detailed business plans for three new endeavors and a new corporate role.
The initial program resulted in a dramatic increase in HoldingCo's ROIC, from 13 percent to 25 percent over a two-year timeframe. HoldingCo is now working with us to further focus on adjacent business opportunities that we identified.
* We take our clients' confidentiality seriously. While we've changed their names, the results are real.