Corporate Insights Portfolio Optimization:
linking performance to value 

Portfolio Optimization:
linking performance to value 

(Fall 2022)

Portfolio Optimization:  linking performance to value

Read the Themes

Companies face operating and capital allocation decisions – and constraints – every day. For multi-segment companies, one of those decisions revolves around providing capital to the segments in their portfolio. To help companies figure out how to best deploy their capital – or to make strategic choices about their portfolios – we wrote a paper on what seems to drive the most value to portfolio companies.

To do so, we looked hundreds of companies over the past ten years and evaluated how operating performance and the qualities of a company’s segments impact the market values of those companies. Many clients worry that a company with multiple segments will not obtain a valuation consistent with its “sum of the parts.” In fact, this paper finds that companies are actually valued on the basis of the operating performance – whether superior or inferior – of each of its segments.

Our clients can use these findings on portfolio construction to diagnose their own businesses and help them make better capital allocation decisions to maximize firm value.

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