In an increasingly competitive and dynamic business landscape, holding company face unique challenges. Not only do they need to enhance the performance of each of their subsidiaries, but they also need to optimize the growth of their entire diverse business portfolio. Unlike single companies, holding companies must be able to maintain a balance between operational independence and strategic alignment, manage resource efficiency, and create value on a sustainable basis.
To grow sustainably, holding companies need comprehensive growth strategies. Growth cannot rely solely on acquisitions. Strong governance, targeted capital allocation, utilization of synergies between subsidiaries, and encouragement of innovation and digital transformation are also necessary.
Portfolio Optimization: The Foundation of Strategic Growth
The business portfolio is the main arena for holding company to drive growth. The first step is to conduct a comprehensive evaluation of the performance, potential, and strategic alignment of each business unit within the group. Subsidiaries that are not aligned with the long-term vision, even if they are profitable, should be considered for divestment to make resource allocation more efficient.
Another step toward efficiency is simplifying the ownership structure and developing targeted synergies. With portfolio optimization, holding companies can focus their resources on businesses with bright prospects while mitigating unnecessary risks.
Value-Adding Acquisitions
Acquisitions remain a key growth strategy for many holding company. However, not all acquisitions generate added value. Therefore, it is important to establish clear acquisition criteria, including industry sector, company size, geographic location, and synergy potential. The post-acquisition integration process must also be systematically designed, particularly in terms of cultural alignment, operational systems, and talent management.
Objective and Strategic Investment Allocation
Investments in holding company should be based on data and strategic considerations, not lobbying or old habits. Funds should be allocated to subsidiaries based on their return on investment potential, position in the business cycle, and contribution to the group’s long-term strategy. Underperforming assets should be divested, and the proceeds redirected to sectors with more promising growth prospects.
Building Collaboration and Synergy
Although subsidiaries operate independently,holding company can create additional value by facilitating collaboration and synergy. This can be done by establishing shared services platforms for support functions such as IT, finance, procurement, and human resources, especially in businesses with operational linkages.
Intercompany innovation centres can encourage the exchange of ideas, accelerate digital transformation, and explore new market strategies. Meanwhile, talent rotation programs across the group can strengthen leadership capacity and build a collaborative culture.
However, synergies should not be forced. Effective synergies can only be achieved if they are truly aligned with the group’s strategy and supported by strong leadership.
Digital Transformation as a Priority
Holding companies must be at the forefront of digital transformation. Subsidiaries need to be encouraged to invest in technologies such as artificial intelligence, automation, data analytics, and customer experience enhancement. Some holding companies have even formed special units to develop new technology businesses or invest in start-ups relevant to the group’s strategy. On the other hand, building data capabilities across the group is an important foundation for sharper and more focused decision-making.
Governance and Human Capital Strengthening
Ultimately, the quality of human capital determines the success of a holding company. It is important to place competent and ethical individuals in key positions, both at the holding level and in subsidiaries. Succession planning and talent development should be strategic priorities, including investment in leadership training programs for current CEOs and future leaders.
In addition, a culture of accountability must be consistently instilled. Each business unit leader must be given the autonomy to run their operations, while remaining accountable for their performance and results.
Reflecting on Jardine
Jardine Matheson Holdings Limited (also known as Jardines) is a holding company with a diversified portfolio of businesses, primarily in Asia. Its leading subsidiaries include Hongkong Land, Mandarin Oriental Hotel Group, and Jardine Cycle & Carriage.
Throughout its long history, Jardines has successfully grown its business by adhering to a number of core investment principles. Jardine invests in sectors with strong growth, in leading companies, and with trusted partners. For example, in businesses related to urbanization and the rise of the middle class in Asia.
Jardine continuously adapts its portfolio to reflect changes in the operating environment and customer needs. When necessary, Jardine invests in new sectors and businesses, divests non-core businesses, or exits certain sectors. The application of these principles over the years has resulted in a diversified portfolio and stable investment returns despite economic uncertainty.
In terms of capital allocation, Jardine prioritizes organic investment within its portfolio to drive profit growth and long-term returns. Jardine is committed to continuing to increase dividend payments in line with revenue growth.
In addition, Jardine evaluates acquisition and merger (M&A) opportunities in new businesses and considers increasing investments in companies under the holding company, including through share buybacks. All of this is supported by strong investment-grade credit metrics, giving Jardine the confidence and flexibility to invest when opportunities arise, even amid financial turmoil.
