Retrospective on Corporate Renewal

An historical review of managers’ corporate renewal decisions reveals an evolution has occurred away from using operating turnarounds in favor of making changes in corporate scope via transactions. One explanation for this progression is that financial valuation considerations supplanted other inputs to strategic logic in seeking value creation—a reflection of the rising institutional influence of financial institutions. The market for corporate control has brought financial owners into the arena of corporate renewal activities. They have embraced the earlier emphasis upon fixing underperforming resources to accomplish corporate renewal. This evolution was supported by the rising importance of private equity firms as suitors to acquire distressed assets. As underperforming resources have been passed from firm to firm until finding an owner willing to confront their operating challenges, specialized financial owners have risen in importance in corporate renewal while the importance of strategic owners in performing operational turnarounds to renew their corporations has eroded.