The workouts they put their acquisitions through typically entail at least five of the major tactics developed in the evolution of strategy.
• They use debt aggressively (something the early partisans of strategy had to encourage their clients to do, stuck as they were in Depression-era thinking).
• They focus on cash flow, not on earnings reported for accounting purposes (early strategy consultants discovered that their clients didn’t actually know their real costs, obscured as those were in the way they presented their financial statements).
• They reduce costs relentlessly (believe it or not, before the revolution most companies didn’t think you could do this systematically).
• They identify a strategy that favors the line of business in which the acquisition dominates its competitors, and then they often sell off its other businesses (it was the strategy movement that got companies thinking about their assets as a portfolio of businesses, with some stars and some dogs to be divested).
• They think imaginatively about who would constitute the best owner for the business and ask how long an owner should hold on to the property (the correct answer is seldom “forever”).
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