Formulation of a Portfolio Strategy


  • The company is a diversified holding operating in a number of engineering sectors and with revenue of more than a billion dollars
  • More than 75% of the holding’s share value comes from operation in only two engineering sectors
  • The holding’s shareholders presented to management the aim of creating a development strategy for the holding that would guarantee more diversification in the engineering sector


  • To formulate a portfolio strategy for the holding, first it was necessary to identify the most attractive engineering sectors from the point of view of investors

Our approach

  • Based on NACE classification, foreign trade and analysis of the product lines produced by large enterprises, the optimal sectors for the engineering industry were identified from a list of 33
  • Sectors that were either too small, or with the wrong kind of enterprises already operating within them, or which did not match up with the holding’s corporate strategy, were cut from the analysis
  • As part of the sector valuation criteria, the future attractiveness of the sector was assessed along with the possibilities of creating a successful business model for the client
  • To evaluate the future attractiveness of a sector, each sector had a forecast constructed through to 2010, assessing profit and EBITDA margin. This forecast was also made for the largest rival enterprises operating in the sector (but not for less than 5 of them). The important factors for success were agreed with key industry experts
  • To assess the possibilities in the client’s business model, the chances of assets being purchased at prices lower than market ones was assessed, along with the possibilities of increasing the enterprise’s efficiency and of achieving an effective exit from the sector


  • Forecast income and EBITDA margin to 2010 for 11 sectors and for the strongest enterprises in each one of the sectors (but no less than 5 of them)
  • Four sectors were chosen for their potential to buy specific assets in them
  • Four sectors were chosen for further study based on their potential


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