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CEOs and CFOs face many strategic challenges created by today’s volatile business environment. In our view, portfolio reviews are an underused tool that can help executives be more agile and decisive in their response to those challenges. The portfolio review process is no longer just about improvement — it’s about allocating the next dollar efficiently, increasing competitiveness and driving value creation at enterprise scale.
Yet too many organizations still view portfolio reviews as a backward-looking, check-the-box corporate chore. A PwC study, The power of portfolio renewal and the value in divestitures, found that only 39% of companies have a robust, data-driven objective process for portfolio review. That means most companies operate on legacy assumptions, misallocating capital and leadership attention to businesses that may be strategically challenged.
Inaction isn’t prudence — it’s strategic risk. Holding on to underperforming or misaligned assets has opportunity costs and can lead to value dilution, investor skepticism and internal distraction.
Efforts to "fix" the wrong business are often misguided. In fact, according to the PwC study, 57% of the executives who tried to turn around underperforming business units as opposed to selling the business unit found that the value either stagnated or deteriorated. Trying harder isn’t the same as making the right call. A structured, objective portfolio review process helps avoid the trap of throwing good capital after bad.
The new operating mandate for leadership
Portfolio reviews should be conducted at least once a year during the annual planning process. They should take a forward view of where the market is heading and how each business can contribute to that future. This isn’t just a financial exercise — it also covers strategy, culture and leadership.
Here are a few questions executives and boards should regularly ask.
- Is this business earning the right to stay?
- Where is capital being created and where is it being consumed?
- Would we acquire this business again today?
- Does it help drive synergies or strategic clarity?
- Are we the leading owners of this asset?
A negative answer to more than one of these questions probably signals a business that no longer fits the company’s long-term vision.
Treat it like strategy — not a cleanup exercise
In the current business environment, many activists are questioning the value of multi-business unit enterprises. There is a reconfiguration towards less diversification and more focus — a shift that can lead to higher multiples.
We’ve worked with companies that have transformed portfolio reviews from reactive financial “cleanups” into proactive, embedded strategic disciplines. The impact is real. According to the PwC portfolio review study:
Board engagement is important. It establishes alignment on timing, reinvestment priorities and rationale. It also accelerates execution, which can help increase the chances for value creation. And it reduces noise from second-guessers who might complain when difficult — but necessary — choices are made.
When divestiture is strategy
Consider recent, high-profile separations by GE, Unilever, FedEx, Honeywell, Jacobs Solutions and Comcast. They were public demonstrations of strategic clarity designed to help create value.
When done well, divestitures can help:
- Unlock capital for higher-impact use
- Resolve internal conflicts
- Create more focused strategies
- Clarify talent and leadership focus
- Improve agility and investor perception
The leading outcomes that we’ve seen share these characteristics:
- A clear articulation of long-term strategic intent
- Data-driven evaluation of fit and performance
- Processes that neutralize biases and help evolve legacy thinking
- Prioritizing reinvestment to build future capability
What CEOs, CFOs, and boards should be asking now
- Which businesses are earning their place in our portfolio — and which are coasting?
- How does our portfolio align with the market we're preparing for, not just the one we’re in now?
- What’s our reinvestment strategy if we divest — and are we ready to execute it?
- Are we being honest about organizational bias, sunk costs and the inertial forces dissuading us from making changes to our portfolio?
If you’re not leading the portfolio conversation, someone else will
Activists, investors and competitors are already asking these questions. The only real choice is whether you answer them first.
In volatile environments, agility is a strategy. Portfolio reviews, when done right, are among the most underused tools CEOs and CFOs possess to create clarity, drive performance and command investor confidence.
How PwC can help
Our Deals team can work with you to turn high stakes into high growth through our strong combination of responsiveness, collaboration and experience across the global marketplace with an intimate knowledge of your business. We can help improve your strategic divestiture with a holistic solution, leveraging skilled industry specialists and on-the-ground experience to secure value at each step.
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