The Value of an Internal Corporate Development Team: Why, When, and How to Leverage This Strategic Asset

Topic: Value Series Reading Time: 7 min

Corporate development, often abbreviated as “Corp Dev,” is a critical function within many organizations. It encompasses a range of activities aimed at driving growth, including mergers and acquisitions (M&A), strategic partnerships, and internal initiatives. The ultimate goal of corporate development is to enhance the value of a company by aligning its strategic objectives with actionable plans.

An internal corporate development team, composed of professionals with expertise in finance, strategy, market analysis, and negotiation, takes on this vital role. They are the architects of growth, constantly evaluating opportunities to expand the company’s footprint, enter new markets, acquire complementary businesses, or establish beneficial partnerships. While M&A activities are the most visible aspect of corporate development, these teams are also responsible for pursuing joint ventures, alliances, and other forms of strategic partnerships that can drive long-term value.

But what exactly is the value of having an internal corporate development team? This article explores the key benefits, the circumstances under which it makes sense to establish such a team, and the situations where it might not be necessary.

The Core Responsibilities of a Corporate Development Team

An internal corporate development team’s primary mission is to identify, evaluate, and execute opportunities that align with the company’s strategic goals. This can include M&A transactions, but also extends to the development of corporate strategies, strategic investments, joint ventures, and alliances.

1. Mergers and Acquisitions (M&A): This is perhaps the most recognized aspect of corporate development. Teams assess potential acquisition targets, conduct due diligence, negotiate terms, and manage integration after a deal is completed. Their role is to ensure that any acquisitions align with the company’s strategic objectives, add value, and provide a clear path to growth.
2. Strategic Partnerships and Alliances: Beyond M&A, corporate development teams also seek out strategic partnerships, joint ventures, and alliances that can provide access to new markets, technologies, or capabilities. These collaborations are often less capital-intensive than full acquisitions but can be equally impactful.
3. Strategic Planning and Analysis: The team supports the executive leadership by analyzing market trends, competitive landscapes, and potential growth opportunities. This data-driven approach helps shape the company’s long-term strategy and investment decisions.
4. Capital Investments and Divestitures: Corporate development teams may also oversee strategic divestitures—selling non-core assets to streamline operations and improve focus. On the other side, they evaluate potential investments in startups, new ventures, or innovative technologies that could benefit the company.

Beyond M&A: The Overlooked Role of Strategic Partnerships

While mergers and acquisitions are a core component of corporate development, strategic partnerships often do not receive the same level of attention. However, partnerships and alliances can be equally important, especially in industries where collaboration can yield faster growth and innovation.

Strategic partnerships may take many forms, from joint ventures and licensing agreements to co-development deals and supply chain collaborations. These alliances can provide numerous benefits, such as shared risks and costs, access to new markets, increased product or service offerings, and technological innovation.

An internal corporate development team plays a crucial role in identifying, negotiating, and managing these partnerships. They assess potential partners, analyze the benefits and risks, negotiate terms, and oversee the implementation and management of the partnership. In some cases, these partnerships can evolve into full acquisitions if the collaboration proves fruitful.

The Benefits of Having an Internal Corporate Development Team

Creating an internal corporate development team can offer significant advantages to an organization, including:

1. Strategic Alignment and Focus: An internal team is more deeply embedded in the company’s culture and strategic goals. They have a better understanding of the company’s long-term objectives, which allows them to identify opportunities that align with the company’s overall mission and vision.
2. Speed and Agility: An internal team can act faster than external advisors or consultants. They are constantly engaged with the business and can quickly mobilize to evaluate opportunities as they arise. This speed and agility can be a significant competitive advantage, especially in fast-moving industries.
3. Cost Efficiency: While hiring external consultants or investment banks for every deal can be expensive, an internal team provides a cost-effective alternative. They reduce the reliance on third-party advisors for routine deal-making, reserving external expertise for highly specialized or complex transactions.
4. Enhanced Negotiation Power: An internal team that is familiar with the nuances of the business can be more effective negotiators. They can leverage their knowledge of the company’s strengths and weaknesses, and tailor their negotiation strategy accordingly.
5. Better Integration of Acquisitions: The internal team is well-positioned to manage post-merger integration, a critical factor for the success of any M&A deal. They understand the internal dynamics and can work closely with other departments to ensure a smooth transition and maximize synergies.
6. Data-Driven Decision Making: Internal teams have direct access to company data and insights, allowing them to make more informed decisions based on real-time information. They can use data analytics tools to evaluate market trends, financial performance, and potential risks, leading to more accurate assessments of opportunities.

When to Create an Internal Corporate Development Team

The decision to establish an internal corporate development team depends on several factors, including the size of the company, its growth ambitions, and its industry.

1. Rapid Growth or Expansion: Companies experiencing rapid growth or planning to enter new markets may benefit from an internal team that can identify opportunities and execute growth strategies quickly and efficiently.
2. High Deal Volume: Organizations that engage in frequent M&A activities or partnerships will find it advantageous to have a dedicated team. For these companies, the cost of maintaining an internal team is justified by the volume of deals they handle.
3. Complex Industry Dynamics: In industries where the competitive landscape changes quickly or where regulatory and market complexities are significant, an internal team can provide the focus and expertise needed to navigate these challenges effectively.
4. Desire for Strategic Control: Companies that want to maintain greater control over their growth strategy may prefer an internal team over relying on external advisors. This approach allows for more direct oversight of the deal-making process and alignment with corporate goals.

When Not to Have an Internal Corporate Development Team

While having an internal corporate development team has many advantages, there are situations where it might not be the best option.

1. Limited Deal Activity: For companies with infrequent M&A or partnership activity, the cost of maintaining a dedicated team may outweigh the benefits. In such cases, using external consultants or advisors for specific transactions might be more cost-effective.
2. Early-Stage Companies: Startups and early-stage companies may not have the resources or need for a dedicated corporate development team. At this stage, their focus is often on product development, market entry, and establishing a customer base, rather than complex M&A or partnership activities.
3. Resource Constraints: Smaller companies with limited budgets may find it more practical to use external advisors on an as-needed basis, rather than bearing the fixed costs of a full-time corporate development team.
4. Stable or Slow-Growth Environments: In industries where growth is steady but slow, the need for a corporate development team may be less urgent. These companies may choose to focus on organic growth and incremental improvements rather than pursuing aggressive M&A or partnership strategies.

Conclusion: Assessing the Value of an Internal Corporate Development Team

An internal corporate development team can be a powerful asset for companies looking to grow through acquisitions, partnerships, and strategic initiatives. The decision to create such a team should be based on the company’s growth objectives, industry dynamics, deal volume, and resource availability.

However, not all companies need a dedicated corporate development team. For some, the cost and complexity may not be justified, especially if deal activity is low or the company is in an early stage of development.

Ultimately, the value of an internal corporate development team lies in its ability to drive strategic growth, provide agility, enhance decision-making, and ensure alignment with corporate goals. For those companies that meet the criteria, an internal team can be a game-changer in navigating the complexities of today’s competitive business environment.

What do you think? Does your company have an internal corporate development team, and if so, what value does it bring? If not, what factors have led to this decision? Share your thoughts and experiences in the comments below!