Ashridge Portfolio Matrix

Some businesses acts as 'parental developer' acquires other businesses with a view to add value to it by using their resources and capabilities. Ashridge portfolio matrix is used to evaluate the attractiveness of potential acquisition target or existing business to the parent. This matrix has two variable according to which the attractiveness of businesses is to be judged.  One is Benefit and the other is feel.  In practice, other variables, like previous experience, management attitudes and culture, stakeholders expectations, may also influence the decision regarding potential acquisitions to be included in the portfolio of the business. All the relevant factors needs to be considered taking the decision. Let discuss each of the above variables.

 

Benefits.

It is the value business can add to potential business by utilizing their resources and competencies.

Business may have many resources and capabilities, but only those resources and capabilities are counted towards benefits which the potential business needs to grow. In other words, benefits are the opportunities to help. More the business can help, more it can add value. Ex. If parent has strong finance department than it can help business needs financial services to add value.

 

Feel.

Feel is the similarity between Parent and the potential business. Similarities can be determined by industry, organization structure, culture and law. There can be many other elements need to be considered. Feel is about critical success factors (CSF) related to the elements stated above. If the business understands how to makes potential business successful as it know its CSF,  it can use its resources and capabilities more effectively. Ex(continued), business needs to know how financial services are provided in context of particular industry.

 

The combination of Benefits and Feels gives the following types of business acquisition targets which varies in attractiveness according to situation.



 

1. Alien Businesses.
   These are the business outside the industry of the business considering takeover or merger proposal, so business has no knowledge of internal and external factors affecting the business operating in that industry, needed to make it successful. It can be said that it has low feel. There are no opportunities for the parent to add value by helping it because potential business has the skills necessary for its success. It can be said that it has low benefits.

 

2. Value Trap Businesses.
   These are the business outside the industry of the business considering takeover or merger proposal. It can be said that it has low feel. There are opportunities for the parent to add value by helping it because the business possess resources and capability to help the potential acquisition target lacks the skills necessary for its success. It can be said that it has high benefits.

 

3. Ballast Businesses.
   These are the business inside the industry of the business considering takeover or merger proposal. It can be said that it has high feel. There are no opportunities for the parent to add value by helping it because potential  acquisition target has the skills necessary for its success. It can be said that it has low benefits.

 

4. Heartland Businesses.
   These are the business inside the industry of the business considering takeover or merger proposal. It can be said that it has high feel. There are opportunities for the parent to add value by helping it because potential business lacks the skills necessary for its success. It can be said that it has high benefits.