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Turnaround: Transforming Value Creation

The 2014 Value Creators Report

July 15, 2014 By Gerry Hansell , Jeff Kotzen , Eric Olsen , Frank Plaschke , and Hady Farag

Turnaround: Transforming Value Creation is the sixteenth annual report in the Value Creators series published by The Boston Consulting Group. Each year, we offer commentary on trends in the global economy and the world’s capital markets, share BCG’s latest research and thinking on value creation, describe our experiences working with clients to improve their value-creation performance, and publish detailed empirical rankings of the performance of the world’s top value creators.

This year’s report focuses on a specific type of value creation success—what we call a TSR turnaround, in which a company with a recent history of below-average value creation was able to transform its trajectory and deliver superior value during the period of our study.

Five Years of Plenty

In 2009, global equity markets were coming off the biggest decline in valuations since the Great Depression. Five years later, the companies in the BCG Value Creators database delivered double-digit average annual total shareholder return (TSR) for the five-year period from 2009 through 2013. We begin by analyzing the results of this year’s top-performer rankings in light of the unusual starting period of this year’s study.

The Dynamics of TSR Turnarounds

TSR turnarounds are companies that deliver superior value creation after an extended period of below-average TSR performance and a below-average valuation multiple. It turns out that companies with this starting position not only deliver more TSR, on average, than the other companies in the BCG Value Creators database. They are also overrepresented in this year’s top-ten industry rankings.

Alfa: Profile of a TSR Turnaround

One company in the BCG top-ten rankings whose value creation performance follows the pattern of a TSR turnaround is the Mexican conglomerate Alfa, the number one company in the multibusiness sector.

Seagate Technology: Orchestrating a TSR Turnaround

Disk drive designer and manufacturer Seagate Technology’s consistent focus on the impact of its business and financial decisions on TSR helped the company and its senior executives navigate an extremely turbulent business environment and win the number two spot in the 2014 global technology rankings, How it did so is also a classic case study of how to orchestrate a TSR turnaround.

Gannett: A TSR Turnaround in the Making

Since announcing a new business and financial strategy in March 2012, the U.S. media company Gannett, perhaps best known as the publisher of USA Today, has tripled its share price and been one of the top value creators in the S&P 500, powerful signs that it is a TSR turnaround in the making.

The 2014 BCG Value Creators Rankings

Download a PDF of the complete 2014 BCG Value Creators rankings listing the top ten value creators globally and in 26 industry sectors.

Acknowledgments

This report is a product of BCG’s Corporate Development practice. The authors would like to thank their BCG colleagues Jesús de Juan, a senior partner and managing director in the Monterrey office; Sebastian DiGrande, a senior partner and managing director in the San Francisco office; Danny Friedman, a senior partner and managing director in the Los Angeles office and leader of the Corporate Development practice in North America; Nicholas Flenning, a senior partner and managing director in the Melbourne office and the leader of the Corporate Development practice in the Asia-Pacific region; Jérôme Hervé, a senior partner and managing director in the Paris office and leader of the Corporate Development practice in Western Europe and South America; Jens Kengelbach, a partner and managing director in the Munich office and global head of marketing for the Corporate Development practice; Eduardo León, a partner and managing director in the Monterrey office; Alexander Roos, a senior partner and managing director in the Berlin office and global leader of the Corporate Development practice; and John Rose, a senior partner and managing director in the New York office.

Turnaround: Transforming Value Creation
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