Growth that has stalled, shrinking margins, shareholders out of step, a purchase offer on the table. There are moments when management is too close to see the options. A strategic review exists to bring them into view.
Most family-owned and mid-sized companies do not carry out strategic reviews. They do budgets. Every year they discuss how much to sell, how much to spend and which investments to approve, but they rarely ask whether the path is still the right one. Until the day something forces the question — and almost always in a hurry.
Signs that the time has come
A strategic review is not an annual exercise. It is a deliberate pause, taken when the company reaches a turning point. The most common signs are these:
- Growth has stopped and nobody is quite sure why. Sales hold up, customers stay, but the company is no longer gaining ground.
- Margins are being squeezed. By larger competitors, by raw material and energy costs, or by customers concentrating their purchasing power.
- The shareholders want different things. One wants to invest and grow, another wants dividends, a third wants out.
- An unsolicited offer has arrived. A competitor or a fund wants to buy, and management does not know whether the price is good or whether selling is the best option.
- Succession is approaching. The founder has to decide whether to hand the company to the family, to a management team or to a third party.
Why it is hard to do from the inside
Those who run the company every day know it better than anyone. That very knowledge is what makes it hard to see from the outside. Assumptions that worked for twenty years become invisible; options that were never considered continue not to be.
There is also a question of neutrality. In a company with several shareholders, any proposal coming from one of them is read in the light of their interests. An outside view, with no stake in the capital and no position to defend, can put the options on the table with equal weight.
What a strategic review looks at
A good review is not a hundred-page report. It is a focused set of questions, with answers backed by numbers:
- Where the company makes and loses money. Profitability by customer, product, channel and market. It is common to find that twenty per cent of the activity consumes the margin generated by the rest.
- How it stands against competitors. Size, costs, price, capacity to invest. In a consolidating sector, being mid-sized can be the worst position.
- What it is worth today, and why. An independent view of value, with the factors that support it and those that weigh on it.
- What options exist. Grow alone, grow by acquisition, join an industrial partner, bring in an investor, sell in full or in part, restructure.
- What each option requires. Capital, time, people, risk — and what each shareholder gains or loses from it.
The decisions that usually follow
A strategic review rarely ends with a dramatic recommendation. In most cases the result is one of three things: a more focused growth plan that drops what does not pay; a decision to prepare the company for a transaction in two or three years, with a list of what needs fixing before then; or the conclusion that the best option is to start a process now — a sale, an investor entry or an acquisition.
Any of these decisions is better than the usual alternative: carrying on as before until an outside event decides for the company.
How to run the process
A useful review has four characteristics. It is short, between six and ten weeks. It involves all shareholders from the start, so that the conclusions do not feel imposed. It works on the company’s real numbers, not sector averages. And it ends with decisions, not vague recommendations.
GestInvest carries out strategic reviews for companies and shareholders across Europe, often as a first step before a capital transaction. Find out about our corporate advisory work or our shareholder solutions.
Frequently asked questions
Is a strategic review the same as management consulting?
No. Management consulting improves operations; a strategic review decides direction and, often, the capital and ownership structure. The two can complement each other.
Do we need to share confidential information?
Yes, which is why the work is carried out under a non-disclosure agreement. The information stays with those conducting the review and with the shareholders.
Does a review commit us to a sale?
Not at all. In many cases the conclusion is to carry on, with a clearer plan. The review exists so that this choice is made with eyes open.
