We help with retrenchment strategy to downsize the scope of a firms’ business activities.
Our clients need support to implement a structured approach to divestitures, when firms elect to sell, close, or spin-off a strategic business unit, major operating division, or product line. Our approach involves thinking through all functional plans – “Day 1” through “Day 100.” Our experience in divestitures ranges from single-asset sales, to business carve-outs, through to some of the largest healthcare transactions at the $50B+ scale.
Our offering involves approaching divestitures with the same level of planning and rigor that counterparts in corporate development bring to acquisitions. For example, we work with management to ensure keeping the business is not essential to positioning the company for long-term growth and profitability. This is what we call our “test for fit”. As important, we also we work out whether the business would be worth more held in the company’s portfolio than if it were to be held anywhere else. This is our “test for value”. If those two test conditions are successfully met, we think through the implementation steps required to generate maximum value from the separation.
When you are selling part of your company, you should not only offer buyers a potential asset – you should also give them the capabilities to gain value from it. Our value proposition includes the acknowledgment that business strategy is always intertwined with capabilities. And a capability is the combination of processes, tools, knowledge, skills, and organizational design needed to deliver a specified outcome. Thus, although most M&A departments spend much more time thinking about the sale price, the attention we place on capabilities can make a major difference in a deal’s outcome.
Most divestitures are reactive, in response to pressure on the parent or the unit. What this means, is that most companies wait too long to divest. Firms should sell off businesses long before they become a burden. We proactively help leaders understand how to maximize value early on. The steps involve include preparing the organization, identifying candidates, structuring the deal, communicating the decision and creating new businesses. Once a decision has been made, while others may focus on just getting a deal done, we do not leave the spin-off hanging, as we think through all the transitional agreements required to ensure the “NewCo” is designed for success; this includes how to achieve sustainable business value while preparing for the challenges ahead.
Our clients predominantly reside in the United States, followed closely by clients from Europe and Latin America.
We measure success by examining the business unit’s impact on the rest of the corporation. We ask ourselves, and others, what effects, both positive and negative, does the business unit have on other units and on the corporation as a whole? Similarly, we look at the corporation’s impact on the business unit (or asset). Any evaluation of a business unit should be two-way. We look at what value the parent adds add to the business, relative to other potential owners, relative to what other owners bring to similar units at competitors and compare this with what another owner could offer the unit to assess the premium another owner might pay to acquire it. Finally, we measure the unit’s ability to beat market expectations. We think about success based in part on whether capital markets currently overvalue or undervalue the asset or business unit. Measuring success in this way shows executives whether the asset or unit can realistically create future value for the company’s shareholders.
We implement a structured approach to divestitures, when firms elect to sell, close, or spin-off a strategic business unit, major operating division, or product line. Our approach involves thinking through all functional plans – “Day 1” through “Day 100”. This 2-minute survey will help us gather context to frame how our Divestment Planning offering could help.