The Role of Corporate Development Talent in Rapid Growth PE Environments
Any business organization has two means of growth – Business Development and Corporate Development.
Business Development (BizDev) can be said to be focused on the brand, the market, and the customer. Business Development contributes to the growth of the company by increasing sales, finding new markets, developing new customers, and servicing customers.
Corporate Development (CorpDev), on the other hand focuses on building revenue and profitability by expanding the company’s reach through building the management team phasing in or out of markets and products, arranging strategic alliances, acquiring companies, securing corporate financing, divesting underperforming assets, and managing intellectual property.
A CorpDev team or professional is typically responsible for developing and directing strategies to help a company restructure its business or establish strategic partnerships through mergers, acquisitions and divestitures. The goal is to improve financial performance, reach a greater level of organizational efficiency and create opportunities to raise the company’s value and competitiveness in the market. The purpose is to improve the company at every level to make it strong and financially healthy.
While Business Development and Corporate Development both have strategic aspects, CorpDev operates at a more global level of strategy than does BizDev. For that reason, CorpDev, particularly in large companies, has evolved from being under the aegis of the CEO or another C-Suite executive to being housed in a department of its own. As the PE-backed startups of the ‘90s and ‘00s grow in size, many of them are finding that CorpDev is a function that the PE firms prefer to do for them and that PE firms do it very well by leveraging their own core strengths of relationship building, financial discipline and diligence. These two trends make it likely that CorpDev will increasingly involve PE firms.
CorpDev requires a set of skills and experience that is very different from that required by BizDev. The activities falling under corporate development include:
1. Management Team recruitment and reorganization
2. Phasing in or out of markets or products
3. Arranging strategic alliances
4. Identifying and acquiring companies
5. Securing corporate financing and divesting of underperforming assets
6. Management of intellectual property.
Each of these areas requires specialized skills. Including high-level financial abilities. Potential mergers or acquisitions, for example, require accurate valuation of companies to be acquired including valuing future potential. People skills are paramount, particularly when the demands of corporate growth require letting people who were formerly key executives go, and also for arranging strategic alliances.
Generally speaking, PE firms have the requisite skills and the people to assign to all of these areas where a company that holds CorpDev as an internal function may not. Also, because CorpDev is likely to involve letting go of people and assets that have been historically important to the business, internal executives and managers may find themselves in some very difficult and delicate interpersonal situations. PE CorpDev executives are unlikely top encounter these issues.
In recruiting for CorpDev personnel, PE firms should look for a combination of Mergers and Acquisitions (M&A) experience and financial expertise such as a CPA or an MBA with an emphasis on finance. “People skills,” while harder to assess, are also crucial – acquisitions are most often small to medium-size businesses, often family-owned over generations. Negotiating for the acquisition of such a business requires a high degree of empathy and diplomacy along with negotiation skills. In the case of mergers, where the target company is likely to be larger, redundancies will mean letting people on both sides go, actions that are best done with a great deal of sensitivity.
Finding exceptional CorpDev executives for a PE firm can be a difficult process, and outsourcing the search for and vetting of candidates is likely to produce the best results and to insulate the company from the possibility of costly errors. An effective recruiting partner will know how to identify the right combination of skill and experience to find the top candidates for a CorpDev position.
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