Every company, big or small, should have a strategic vision or strategic plan. One of
the primary goals of that strategic plan should be to:
Improve, maintain, and/or accelerate the market leadership, proﬁtability, and
growth trajectory of a company, thereby leading to enhanced shareholder value.
A strategic plan goes beyond geographic expansion plans and new product ideas. It
also goes beyond the ﬁnancial projections for the company. Rather, a company’s stra-
tegic plan is a roadmap addressing a fundamental question: What type of company
does it aspire to be and how does the company expect to achieve that goal in the next
ﬁve to ten years.
A strategic plan must balance the desires to grow shareholder value, and thereby
appeal to equity investors, with a complementary ﬁnancing strategy that appeals to
debt investors as well. A strategic transaction is any action that helps implement
a company’s strategic plan. That action can be on a small scale (such as the sale of
one manufacturing plant) or a large scale (such as a corporate merger with another
company). In addition to building, buying and/or selling assets, a strategic action can
be related to ﬁnancing, such as the decision to implement an aggressive stock buy-
back program or recapitalization. The value of a strategic transaction is measured by
many metrics, the most important of which is a company’s stock price.
The product of any strategic planning exercise is usually a “base case” ﬁnancial fore-
cast for the next ﬁve to ten years. The base case forecast should incorporate the most
likely operating and ﬁnancial strategy. Alternative scenarios as well as upside and
downside cases are usually prepared as sensitivities to the base case. The strategic
plan is usually updated once a year after a company wide effort to capture the most
likely operating and ﬁnancial scenario. Throughout the year, the base case strategic
plan and ﬁnancial forecast are used as planning tools.