Building and maintaining effective support functions requires significant investment, and can affect how two companies think about value creation when separating. Partner Anna Mattsson and coauthors find that across industries, general and administrative (G&A) costs are significantly lower—4 to 8 percent of revenue—for high performers than those in the bottom quartile.
Image description:
The horizontal chart shows a plot of both top quartile and bottom quartile general and administrative costs by industry as a percentage of revenue. The 8 industries are displayed down the left-hand side, and their respective costs are displayed with a dot shaded for either top quartile or bottom quartile, ranging from widest disparity to narrowest disparity. The industries listed from top to bottom are financials, energy, industrials, information technology, retail, healthcare, consumer products, and materials. The top quartile industries spend a considerably smaller proportion of their revenue on general and administrative costs than the bottom quartile do.
Source: S&P Capital IQ; S&P 1200
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To read the article, see “The power of goodbye: How carve-outs can unleash value,” February 7, 2023.