While many steps are similar to the acquisition process, the preparation for a divestiture can be much more complex, as the business unit must be carved out from the existing organization, functions, and services of the selling company and transitioned to the buyer and its functions and services.

A key step in this preparation for sale is to identify all shared services, such as those typically provided to business units within the company, for example, IT, HR, and finance.

This should be done by establishing a small team under nondisclosure representing each functional area providing services to the business unit, and possibly a senior member of the business team to be divested. This team should identify all these services, as well as preparing a sell-side due diligence, in anticipation of what a potential buyer will ask, possibly using the questions the selling company would ask if they were buying the business unit to be divested.

Sometimes the business unit to be divested provides services to a selling company’s business units that are not being divested. In this case, those services should also be identified and plans put in place to replace those services within the company that is selling the business unit.

How are these shared services documented?

All the services that the small team identified can be listed in a document called a Transition Services Agreement, or TSA. For each service, it is important to define exactly what the service is, what it costs the business unit (probably found in the business unit’s budget/financial numbers), and a suggested date for when the service will be terminated for the business unit being transitioned.