Corporate Development is the group at a corporation responsible for strategic decisions to grow and restructure its business, establish strategic partnerships, and/or achieve organizational excellence. The purpose of Corp Dev is to create opportunities for the company through actions such as mergers and acquisitions (M&A), divestitures, and deals that leverage the value of the company’s business platform.
Corporate development is needed by a company to create and execute innovative strategies that will help the company harness its competitive advantage and thereby:
- Enable the company to outperform its competitors
- Improve the financial and operating performance of the company
A decentralized Corp Dev organizational model actually means there is no core corporate development department. Instead, a corporate development team is put together on a case-by-case, or ad hoc, basis, and is made up of individuals from various internal departments.
The exact composition of the team is determined by the expertise required for the specific corporate development project. For example, if the project were a divestiture, then the Corp Dev team would be heavily populated with individuals from the corporate finance and legal departments.
The centralized model is the most popular model of corporate development, while the decentralized model is the least popular model.
Typically, corporate development is a centralized function because this gives the Corp Dev team a birds-eye view of the organization which helps them to spot opportunities and threats. This allows the company to take advantage of being a first-mover in case of an opportunity, and take pre-emptive action against threats. Such a structure also allows the corporate development team to structure deals with other businesses that fit well into the company’s portfolio.
However, it should be noted that a centralized Corp Dev department does not imply that the department works in complete isolation from other operational groups within the company. For example, after acquiring a business, the corporate development team helps integrate the acquisition into the company by collaborating with support functions and business lines within the company and with vendors outside the company.
Under this organizational model, the corporate development department is lean i.e., it consists of very few Corp Dev professionals. This lean team depends on a network of external and internal resources for providing subject matter expertise when evaluating potential partnerships and strategic transactions.