NEW YORK - Sept. 17, 2003 - Conventional wisdom has it that conglomerates suffer from inherent structural and managerial weaknesses and that their risk-spreading qualities are of no value to investors who can diversify their own portfolios. But a new global study by Marakon Associates, the strategy consulting firm, shows that a surprising number of conglomerates manage to significantly outperform their benchmarks.

The study, entitled "Conglomerate Discount or Premium? How Some Conglomerates Create Exceptional Value," found that over 15% of conglomerates recorded 10-year total shareholder returns of 20% or more, and nearly a quarter outperformed their regional market indexes. The authors examined nearly 90 diversified companies worldwide with market capitalizations of at least $500 million.

"Many conglomerates remain obsessed with empire building, sacrifice value for growth, overpay for acquisitions, hang on to businesses that will never prosper and fail to impose disciplines that sustain value growth," noted Chris Kaye, a manager in Marakon's Singapore office and co-author of the study. "But our research shows that these weaknesses are not endemic to the conglomerate model and that conglomerates can create exceptional value by avoiding some common pitfalls and turning their disadvantages into strengths."

Kaye's and co-author Jeffrey Yuwono's research revealed two common characteristics that distinguished top-performing conglomerates from their less successful peers:

• They have financial rather than strategic or operating visions, and adopt uncompromising, value-focused approaches to portfolio management


• They use reward systems to create and maintain entrepreneurial cultures controlled by the center through simple, rigorously policed rules and targets

For a full copy of the study, click here.

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About Marakon Associates:

Marakon Associates advises top executives on growing the long-term value of their companies. The firm is widely recognized for its integrated approach to leadership, organization, strategy and finance, which produces exceptional long-term value growth. Marakon is based in New York and London, with additional offices in Chicago, San Francisco and Singapore.