This is part of our on-going series on how companies can build in-house competencies in mergers, acquisitions, and divestitures through cost-effective in-house training programs offered through the M&A Leadership Council.
Today’s topic: Managing a Divestiture to Success
While many companies have a strategy of growth through acquisitions, it is also possible to create business growth through a divestiture: spinning off a division that is not core to your business, divesting a business unit that no longer fits within your corporate strategy, or selling an underperforming unit.
Divesting a business segment may be a sound business strategy, but it also is not a frequent corporate activity. As a result, in-house training programs provided through the M&A Leadership Council can benefit a company looking to effectively plan and execute a divestiture program. As with many of our customized, in-house training programs, the focus is on the following:
- Provide just-in-time training around the fundamentals of effectively planning and managing a divestiture
- Align the executive team around the stages of divestitures, best practices and critical success factors
- Train the in-house team on the what, the why, and the how of divestiture planning and execution
- Jump-start the planning process and rapid project launch by facilitating the divestiture team in developing a high-level game plan, determining the core team needed to manage the effort, fleshing out the issues and opportunities to be addressed during the three key stages of the divestiture effort, and outlining the approach and process to follow during the divestiture
An effective divestiture should center on the following components:
- Why are we doing the divestiture and the value we anticipate achieving as a result?
- What are the key things we need to do to prepare for effective turnover (or spin-off) of the divested business… what are our responsibilities and deliverables versus the acquiring entity?
- What support do we need to provide to the divested/spun-off business after date of legal change of ownership (e.g. Transition Service Agreement components and characteristics)?
- What are the governances, operating guidelines and clarity of roles and responsibilities between divesting party and acquiring party, both getting to date of divestiture and during the terms of the TSA?
- What changes after divestiture do we need to make to our remaining business, how do we “right-size” and optimize it, and how are we going to maximize business benefits to us as a result of this divestiture?
As with M&As, divestitures are an opportunity to achieve sustainable business value; however, it is not core to what our people do on a daily business so they need to be educated and trained on the nuances of effective divestiture planning. Your people have the industry and functional knowledge of their business; however, managing a divestiture is a skill-set and a head-set change from their normal activities. Doesn’t it make sense to effectively prepare them for the challenges ahead?