The acquisition and divestiture strategy is among the most complex aspects of managing an M&A process. It requires constant analysis to differentiate between core assets and non-core. A well-planned divestiture plan and a clear strategy will aid in reducing the cost of acquisitions. The cost of maintaining non-core assets may also outweigh their value. It is vital that managers allocate the resources necessary to prepare and structure divestitures.

The first step of a divestiture is to determine potential buyers for the asset. Financial modeling and discounted cash flows (DCF) analyses are used to accomplish this. Finance professionals are usually involved in this stage.

Negotiations for a sale can begin after the company has identified a potential buyer. This is a crucial step to ensuring that the company sells the asset at a reasonable price. The business will receive a substantial amount of cash following the sale. This cash flow is typically used to expand existing business divisions or to explore new avenues of business. It may also be used to pay off debt.

The most common reason for a divestiture is to get rid of a profitable business line. This type of divestiture usually is a carve-out which means that the parent company keeps a percentage ownership, or a spin-off where the subsidiary was sold to shareholders. In both cases, maximizing value is the goal. A successful divestiture will require an effective plan for communication and taking into account the needs of employees after the transition.

Leave a Reply

Your email address will not be published. Required fields are marked *