Companies divest operations for a variety of reasons. A company may decide to refocus its strategy on selected core operations, making certain businesses unfeasible for the company’s long-term future. Or a company may choose to monetize assets to redeploy that investment in other opportunities or pay down debt. The assets may not be underperforming, but simply no longer fit with the seller’s business and may have more value in someone else’s portfolio of operations.
However, as anyone who’s been through the process can attest, deciding to divest and actually executing
a divestiture are very different things. Meticulous, purposeful planning is absolutely critical to maximizing the value for all stakeholders. A critical early step in the divestiture process is to carefully understand how broadly and deeply the entity to be divested is embedded within the seller’s organization.
Common issues around divestitures
- Financial statement implications, including current cost allocation and stand-alone costs
- Transition services agreements
- Separation issues
- Stranded costs
In too many cases, sellers underestimate the complexities of the challenge and/or do not have a sufficient understanding of the specifics. We recommend a common starting point—the interdependency assessment—for any company looking to undertake a divestiture.
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Partner, Transaction Advisory Services
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