Demystifying corporate development: Debunking 5 key myths

We often hear misconceptions about corporate development’s role in a company. Corporate development is frequently referred to as project management, business development, or simply mergers and acquisitions. But limiting corporate development’s role to just these activities without unleashing its full potential can limit value optimization in an organization. This is the first in a series of articles that will explore what corporate development is, what it is not, and its role in optimizing value. 

Myth 1: Corporate development is just acquisitions 

Corporate development is more than just mergers and acquisitions (M&A). It drives a company’s strategy forward, operating as a holistic solution to shepherd the highest priority strategic initiatives from ideation through execution to completion. It is an iterative process that involves ongoing reviews and assessments. In addition to M&A, corporate development designs and executes other inorganic strategies (e.g., divestitures, joint ventures, strategic partnerships, etc.), and organic strategies to drive a company’s top priorities. 

Defining corporate development as simply driving strategic priorities and inorganic growth initiatives is still too narrow of a view. While a company’s goal is to create value (i.e., increase profit, build customer satisfaction, promote operational efficiency, etc.), corporate development’s goal is to optimize value, which starts with strategy development. 

Myth 2: Corporate development is just project management 

Corporate development supports the C-suite and board of directors in front-end strategy development by designing, reviewing and updating business plans to assess potential areas for growth or improvement. Corporate development reviews the portfolio and assesses the ways in which it can extract the most out of existing resources and where it needs to invest in new resources. Corporate development works across business units (BUs), functions, teams and stakeholders to consider the role and impact of each  —  and to act as the glue that connects all BUs. 

After business plan development, corporate development’s responsibilities continue with “buy vs. build” analyses to determine optimal avenues for growth (i.e., should the company develop a solution itself or buy/partner for one). As part of this process, corporate development prepares financial models to substantiate a business case and assesses expected returns. 

Corporate development also looks externally, monitoring macroeconomic and industry trends to benchmark product relevance, financial goals and objectives against competitors. This forward-looking approach enables corporate development to glimpse around corners, identifying and filling white spaces in the market to expand a company’s reach and ensure long-term success. 

Myth 3: Corporate development and Business development (BD) are the same 

Corporate development creates strategies that seek to improve value creation, and BD supports these strategies, generally through organic means. BD mainly focuses on how a company goes to market (i.e., sales/marketing) and how the business interacts with market participants. As such, BD’s primary goal is to increase sales by cultivating relationships with vendors and collaborating with marketing to bring in new customers or clients and increase sales to existing ones. Because of its proximity to the market, BD may help corporate development identify partnerships or acquisition targets to grow the business and close product relevance gaps. In either scenario, corporate development will work with BD to establish strategic oversight and to align and mobilize key stakeholders for successful execution. 

Myth 4: Corporate development’s responsibilities end at the signing of a transaction 

After signing, corporate development continues to manage external stakeholders (e.g., lawyers, bankers, consultants, etc.) and internal stakeholders (e.g., business leaders, teams, HR, IT, etc.), to conduct planning and separation or integration activities. Corporate development also leads interactions with the deal counterparty to ensure alignment in planning and execution. 

An important part of corporate development’s role is to manage and uphold M&A and corporate governance. Corporate development is responsible for reporting to the board of directors and any established project steering committees, and for managing risk throughout the transaction. Even after signing a deal, the transaction can still fall through due to a variety of factors (e.g., inability to execute, regulatory constraints, etc.). It is corporate development’s responsibility to predict and prevent these risks from impacting or halting a transaction. 

Myth 5: Corporate development’s responsibilities end at the closing of a transaction 

Corporate development’s role in managing stakeholders and reviewing and revising a company’s strategy continues well after the closing of a transaction. As part of the review process, corporate development conducts lookback analyses to assess key performance indicators against the business case and commitments pre-sign. Corporate development will then repeat a strategy to further optimize value creation. In doing this, corporate development acts as the central force to support a company in its endeavor to optimize value. 

Conclusion 

Corporate development both conducts M&A and supports BD. It also manages stakeholders and risk, analyzes success, coordinates execution, and much more. However, corporate development’s work is greater than the sum of its parts, delivering growth and optionality. 

Although we have come a long way toward demystifying corporate development, this is just the beginning. As we dive deeper into each of the themes discussed here, we hope you will join us in our next article, in which we focus on how corporate development supports strategy creation to drive optionality and support organizations through economic cycles. 

If you have any questions, or are looking to learn more, please feel free to reach out or visit pwc.com.