Corporate Development

What Is Corporate Development?

Corporate development, also known as Corp Dev, is a strategic division within the company responsible for activities related to corporate finance, mergers & acquisitions (M&A), and overall business prosperity.

Corporate development predominantly concerns the company's strategic decisions and initiatives. The group is also tasked with identifying and implementing new opportunities and aiding an established company's growth.

It is in charge of planning, organizing, and implementing strategies to help the company achieve its business objectives and targets. The corporate development department is usually found in large corporations that can afford and justify the cost of such a department.

Corp Dev teams can consist of professionals from various departments whose knowledge and skills are required and can bring a different perspective to a critical project.

Undoubtedly, professionals with a finance or accounting background also work in corporate development.

Individuals with experience in mergers and acquisitions (M&A), large-scale dealmaking, and investment banking can significantly contribute to the group thanks to their skills and expertise.

Depending on the structure of the department, one can organize the group as the following.

Centralized Unit

Under this model, the group is identified within the corporation's structure. It establishes the key drivers for growth and value-added activities. 

The department isn't siloed - it can consult and collaborate with other internal teams when specific expertise is required to gain insight and analysis.

Decentralized Function

Organized as a decentralized entity, the team doesn't have a distinct presence. 

It functions as an ad-hoc department where professionals from different teams work together to achieve a goal that will enhance the corporation's competitiveness, initiate new strategic partnerships, or identify opportunities to catalyze long-term growth.

The decentralized structure enables delegation and allows for decision-making on different hierarchical levels.

Hybrid Model 

This type of internal organization enables the team to have an overview of the company's operations and growth prospects while drawing in resources and input from other internal departments when required and depending on the characteristics of the project.

The Corp Dev department collaborates with other teams and stakeholders across the corporation to obtain a multi-faceted view of the company, which helps inform strategic decision-making. 

They take a holistic approach and look at all aspects of the business, including strategy, operations, finance, marketing, sales, R&D, and technology.

Corporate development Roles

The Corporate Development group plays a pivotal role in a corporation's long-term strategy and is critical in analyzing and exploring new opportunities.

It interacts with key stakeholders, senior management, and executives to produce the best outcomes for the company in terms of growth, investments, development, and innovation.  

The team also influences and steers the company in the desired direction. The function is responsible for identifying, analyzing, and executing strategic initiatives to help an organization grow.

The corporate development roles encompass a wide variety of strategic and corporate-level responsibilities focused on driving inorganic growth, and optimizing the company's profitability and portfolio. Some of the key roles of corporate development include:

1. Identifying and Evaluating M&A opportunities
2. Executing M&A Transactions
3. Strategic Planning & Analysis
4. Identifying, Evaluating, and Executing Partnerships & Alliances
5. Leading and Assisting in Divestitures & Restructuring
6. Preparing Presentations and Communications for Better Stakeholder Management.

Corporate development teams manage and oversee big-scale projects that include but are not limited to: 

• Analyzing and setting out strategic business plans
• Creating the company’s vision statement
• Exploring possible strategic acquisitions or partnerships 
• Executing divestitures and restructuring
• Setting long-term goals
• Strategic planning and achieving company-wide efficiencies 

Corporate Development vs. Other Groups Within a Company

Corporate development is one of the many departments in a large corporation or financial institution that is responsible for making strategic decisions. 

However, what makes this unit distinct from other teams because they operate on a bigger scale. The decisions made by this team affect the organization over the long term. 

Implementing strategic plans is a longer and more complex process than the company's daily operations. 

A corporation's success and sometimes its subsistence depends on the well-thought-out execution of plans and initiatives, which demand cross-team input, careful considerations, and thorough risk-benefit analysis. 

Corporate developers are responsible for identifying threats and opportunities to give the organization a competitive advantage. In essence, it oversees all aspects of the company’s growth.

The group might be comparable to other groups that serve similar functions - such as business development or corporate finance - but there are critical differences between them. 

Business development leverages the organization’s customer base, products and services, and relationships to find growth-generating activities. 

Finance focuses on keeping financial records and administering operations to support any company in business. Corporate development, however, concentrates on developing strategies for a company’s future growth.

Corporate Development vs. Corporate Finance

One of the main differences between corporate development and corporate finance resides in how one can enter the field. 

Working in corporate finance could pave the way, although this could happen more at a higher organizational level than in junior entry-level positions.

In particular, a finance professional from the Financial Planning and Analysis (FP&A) team could transition into corporate development. 

Corp Dev teams are generally smaller than those in corporate finance. 

The criteria for joining the unit emphasize the candidate's professional experience—an experience in M&A transactions, as this accounts for a significant portion of the work, or an investment banking background is prioritized. 

In contrast, corporate finance professionals must demonstrate solid accounting knowledge. 

As a Wall Street Oasis forum user has aptly remarked below, the talent pool for corporate finance roles is broader than that of corporate developers, which is somewhat more exclusive. 

Often, undergraduates could secure an entry role into corporate finance, whereas Corp Dev doesn't necessarily provide such a path.

harvardgrad08:

In all reality, corp dev & strat groups are like banks. They want people with a particular pedigree. Generally top undergrad + 2 years of banking/consulting. The farther you get from this background, the harder it will be to get a job. It's possible, but it requires a lot of networking, hard work, and just proving yourself over and over. 

In addition, Corp Dev experience can benefit those who aspire to move to investment banking (IB) or private equity (PE), the latter being notoriously more challenging to break.

Professionals with a corporate finance background would find it more difficult to break into investment banking, as the skill set needed is quite different. 

Corporate Development Vs. Business Development

Business development defines the processes and actions that bring organizational value and growth through existing and new market segments, customers, and relationships. 

Business development teams identify growth opportunities and subsequently establish the appropriate actions, which include market research, brand awareness, marketing, and generating leads that will ideally become regular customers. 

Business development can be interpreted differently depending on the operating unit. But in essence, it is responsible for generating profitable ideas that will attract new customers or partnerships to the organization, leading to long-term growth. 

Corporate development and business development have the critical targets of long-term growth, profitability, and competitiveness. However, the difference between these units is the scale on which they operate.

The key performance indicators (KPIs) of the business development department could feed into the bigger strategic plans set out by corporate development. 

The timeframes necessary for executing planned and approved projects also differ. 

Large-scale initiatives, such as mergers and acquisitions, divestitures, or corporate restructuring, take longer than launching a new product, service, or brand awareness campaign. 

Responsibilities of the corporate development team

To grow, a corporation needs a strategy. Corporate developers are responsible for developing the plan and figuring out how to achieve it. They handle everything from researching to creating forecasts and business plans.

The group also ensures that management is working as efficiently as possible. They encourage senior management to develop new skills and audit the company culture. 

Changes to company culture require the input of different teams to produce results that foster innovation and creativity and enable employees to work as efficiently and effectively as possible. These changes can affect the organization in the long term. 

Aside from managing company performance, corporate developers also focus on growth opportunities outside the organization's current scope of business. 

These opportunities come in many forms, notably strategic acquisitions or partnerships with other companies. Some of those core responsibilities are outlined below.

Business Plans

The team is responsible for drafting a business plan. In addition, the team is tasked with setting long-term goals and exploring possible strategic acquisitions or partnerships. 

Once they draft a business plan, it is submitted for review by various stakeholders in the company. 

If approved, the business plan becomes the roadmap for how to move forward with executing new opportunities. It can also serve as a tool for senior leadership and an overview of company goals and objectives.

Vision Statement

A Corp Dev team is responsible for creating a company vision statement. This statement aims to articulate the company’s desired future goals and provide an overview of its strategy.

Vision statements can help employees and stakeholders understand how they will contribute to the company’s success. 

By comparing the vision statement with actual business operations, an organization can monitor its progress and adjust its strategy when needed. 

Day-to-day business operations and specific objectives are expressed in the company's mission statement.

Combining elements of the vision and the mission statements help enhance employee engagement and provide concrete steps to success. 

Vision statements, inspirational forward-looking statements, are often written by leadership teams and approved by upper management before being released to the public. 

However, many companies find it beneficial to involve the entire team in crafting a vision statement so that everyone is on board with it from the start - this way, they will know why they are doing what they do every day.

Strategic Acquisitions or Partnerships

One of the profession's responsibilities is to seek out and identify opportunities that could be mutually beneficial for the potential partner and the company.

These partnerships can be as simple as a sponsored tweet or as large as buying another company.

The benefits of these partnerships are numerous: more customers, new products, and diversified revenue streams.

Before taking on a more significant investment, it is essential to ensure a strategic plan and understand what is desired from the acquisition/partnership before making any commitments.

Acquiring a target company is a long and complex process involving in-depth analysis, due diligence, and establishing a framework that complies with all regulatory and legal requirements regarding the transaction. 

A transaction can create, destroy, or appropriate value. 

• Value creation: It refers to the goal and purpose of the M&A deal. The primary purpose of acquiring or merging with a company is to achieve synergies, gain access to new markets, including foreign market exposure, and increase customer and product base. 
• Value destruction: Value destruction can accompany heavy financial losses for the acquirer and reputational damage. The factors influencing a deal and inadvertently destroying value are overvaluation of the agreement, third-party intervention, and cultural inadequacies.
• Value appropriation: Value appropriation relates to the value created for the acquiring and the acquired companies once they have merged.

An accretion/dilution modeling could give an insight into whether the transaction creates or destroys value. 

Financing

Another essential function of the department is financing different initiatives, projects, or acquisitions. 

Depending on the characteristics of the venture, financing methods can include:

• Raising capital from investors through the issuance of debt or equity securities.
• Using retained earnings.
• Accessing different types of loans - term loans and margin loans.

Ad Hoc Reporting

The reports issued by the group are destined for the board, C-suite executives, management, and investors, including activist investors, for example, hedge funds.

An example of a Corp Dev report could be the presentation of estimated financial data for the new company following an acquisition or a production explaining the main operating metrics and drivers of the value of a target company.

How to evaluate corporate development's effectiveness

Like other business units, corporate developers are subject to performance evaluation. The performance indicators' significance corresponds to the team's role in the company.

The performance of the team is evaluated against key performance indicators. The value-added of the initiatives should be assessed from a mid-term perspective, as it can take a few years for strategic projects to pay off. 

Some of these performance indicators are outlined below.

1. Business growth rate: It refers to the change in a critical indicator over a certain period, for example, the number of customers or sales.
2. Job creation rate: Job creation positively signals a company’s performance. 
3. Employee turnover rate: As far as the employee turnover rate is concerned, depending on the nature of the business, this metric can fluctuate. However, a 10% employee turnover rate is considered acceptable. Therefore, the employee turnover rate is expressed as a percentage of the: 
   • Employees who left / the Average number of employees.
4. Return on investment (ROI): The return on investment is a function of the revenue generated and the initial capital outflow for that investment. The higher the ROI, the more profitable the venture. 
5. Internal rate of return (IRR): The internal rate of return is the rate of return required of a project to be considered for investment.
6. Revenue growth: Positive revenue growth resulting from strategic initiatives is a critical success metric.
7. Capturing synergies: The group is held accountable for three deal synergies - revenue, cost, and financial. 
   • Revenue synergy: means that the revenue generated by the new company after the acquisition is greater than the revenue of the individual companies.
   • Cost synergy: Associated with the overall cost reduction for the new entity compared to the acquirer and acquired company's cost base before the acquisition. 
   • Financial Synergies: The change in the cost of capital for the acquirer and the newly formed company after the acquisition.
8. Dilution/accretion: Analysis concerns the acquirer's earnings per share (EPS). Higher EPS signals that the deal is accretive. Conversely, a lower EPS is a sign of dilution.
9. Strategic factor analysis: The analysis combines internal and external factors against which the team is scored. Internal strategic factors refer to the organization's culture, resources, and structure, whereas external factors can include, for example, the competitor environment and market conditions. 
   • External factors can also refer to the PESTEL analysis, which stands for political, economic, social, technological, environmental, and legal.
10. Customer retention: Retaining customers and increasing the customer base are vital for a business to keep its operations running and expanding. 
11. Ability to launch new products or services successfully: Bringing new products and services to the market is critical for generating revenue and capturing new customer segments.

Skills To Succeed in a Corporate Development Team

Corporate developers need to master technical concepts such as valuation and financial modeling. They must also be proficient in building strategic relationships internally and externally and excel at negotiating, influencing, and communicating. 

The core capabilities are shown below: 

1. Strong Excel and PowerPoint skills: Similar to bankers, professionals in this corporate group need to have an eye for detail and be meticulous about presentations and data management. 
2. Financial modeling: Understanding and articulating a company's financial information is important for making future decisions. Financial modeling is executed in an Excel spreadsheet.
3. Persuasion and influence: An essential skill for corporate developers, the ability to influence and persuade plays a vital role in communicating the merits of a strategic initiative to stakeholders. 
4. Negotiation: Expert negotiators are vital for mergers and acquisitions. They must also be able to construct a dialogue with investors, particularly activist investors. Demanding investors will require someone skilled at conducting these conversations. It has become common to find investor relations professionals working in Corporate Dev. 
5. Clear communication: The ability to effectively understand and interpret information from various business units is indispensable.
6. Resource management skills: Corporate developers interact with many stakeholders, including investment banks, lawyers, and third-party consultants. They must manage their costs, make the most efficient use of their time, and communicate the necessary and relevant information to each party. 

Corporate development structure

The team structure will vary from company to company, but there are some general similarities. For example, corporate developers are often part of the executive team and report to the CEO.

They may also write to the board of directors, depending on the type of business.

The size of this group will also depend on the size of the company. Generally, one person can be in charge if the company has less than 50 employees.

As the organization's size increases, so does the team. 

Typically, the structure is the following, starting from the lowest to the highest role:

• Analyst
• Senior Analyst
• Manager
• Senior Manager
• Director
• Senior Director
• General Manager
• Chief Financial Officer (CFO)

Depending on the company, a Head of M&A will usually report to the CFO. 

What Salary Can You Expect?

Compared to investment bankers, corporate developers enjoy a better work-life balance with very decent pay packets, although less substantial than the paychecks earned in investment banking. 

Usually, the total compensation in the group has three components - the base salary, a cash bonus, and stock options, with generally a 5-year vesting period.

An example of what the total compensation looks like across the different hierarchical levels is summed by a forum user.

Accounting by day:

- C-Level Executives (top 20 or so people at the company): total comp $5M+/year

- VPS: total comp ~$2-5M/year

- General Managers: ~$500K-$2M/year

- Sr. Director/Director: ~$300-500K/year

- Sr. Manager/Manager: $150-300K/year

- Sr. Analyst/Analyst: $100-150K/year

What Are The Exit Opportunities?

Corporate developers have different career options. The most common choice is to move to the Corp Dev group of another organization or strategy role, whether in the same or a different one.

Additionally, they can go for roles in venture capital, private equity, or activist hedge funds, highly dependent on the individual’s ability to network. 

Corporate developers can equally fill the positions of divisional CFOs, hold junior executive or leadership roles at other companies or even opt for startup management jobs. 

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources:

• Hedge Fund Manager
• Investment Banking Job Description
• Leveraged Finance (LevFin)
• Private Equity Job Description
• Venture Capital Job Description