CRA publishes Armitage and Grundman on “What to Do with the Cash: Of Gates, Tracks, and Signals”
Faced with strengthening balance sheets, expectations of slower growth in core markets, and recovering share prices, defense companies in 2010 were facing the seemingly enviable strategic challenge of “what to do with the cash?” In this issue of CRA Insights first published in March 2010, Charles Armitage and Steven Grundman describe and illustrate a framework that can guide defense companies’ choices about how to maximize value creation through cash deployment.
They believe companies that want to determine how they can maximize the creation of economic value from the cash on their balance sheets must undertake a disciplined walk through a framework of gates. This process involves understanding the company’s outlook for market growth and competitive advantage and adhering to a corresponding track of portfolio investments. Finally, they argue companies that want to strike the right balance of cash deployment objectives must also manage the dynamic overtones of the signals their actions register with investors.