Industry snapshot: Smarter M & A

Here’s a simple example of how powerful intangible capital can be. In an industry meeting, we recently asked a panel how they could leverage their intangible capital (human, structural, relationship) as they moved into international markets. Bill Glavin, President and CEO of Babson Capital (a MassMutual member company), stepped right up. He cited Babson’s acquisition last year of Duke Street Capital in London. He explained that Babson had market and deal knowledge (structural capital) that could leverage Duke Street’s relationship capital in the UK and European leveraged loan markets. Glavin reported that this combination of IC has led to explosive growth in their European portfolio.

We find the language and the structure of intangible capital to be very helpful in thinking about today’s business challenges. In this example, it is the non-financial assets of this financial company that generate revenues, build a sustainable business, and create lasting value. Their human capital builds on their base of market and deal knowledge through creative and disciplined thinking. This knowledge gets recorded and converted to structural capital so that it can be shared and leveraged across new staff and new markets. Relationship capital is where value gets monetized. It is also a source for new ideas and innovation.

The power of the intangible capital concept is in using it to identify and assess the strength of your value creation process today and your ability to improve it tomorrow.