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Published: August 27, 2013
 / Autumn 2013 / Issue 72

 
 

The Secret to a Successful Divestiture

  1. Do you have a clear sense of what you’d like to sell, what you think it’s worth, and what capabilities might be involved?
  2. Do you know when you’d like to complete a transaction, and do you have a rough sense of the time line leading up to that?
  3. Do you have a list—if not by name, then by type of company—of who might be interested in your assets?
  4. Do you have a clear sense of how the sale will affect capabilities you’ll need for your retained businesses or assets?
  5. Do you have a dedicated transaction team, and if so, does the team have a clear set of priorities?
  6. Do you have measures in place to track your progress? Do you have clear measurements for the success or failure of the transaction?

The skills you develop during this process aren’t relevant just to divestitures. They can also be used to reduce risk; create value; and improve the outcomes of acquisitions, spin-offs, and portfolio restructurings. Your work on divestitures can span organizational boundaries, geographies, business units, and functions, and thus help you develop the structures and communications links you need for other complex initiatives. The focus on capabilities involves accounting for factors that are often overlooked. It can help you avoid the tunnel vision that often accompanies a singular focus on financial matters during major transactions—and that can keep you from seeing the broader strategic impact of your decisions in general.

Many companies pride themselves on their ability to use acquisitions to drive inorganic growth. It’s far more rare to find a company that prides itself on the way it divests a business or asset. That’s understandable; by their nature, divestitures focus on businesses or assets that once seemed promising but no longer fit with where the seller is heading. It isn’t surprising that there would be a mind-set of “the sooner, the better” and a narrow focus on the price. If you use the filter of capabilities, the divestiture might take a little longer, but it can leave your company better off in the ways that matter most. 

Reprint No. 00208

Author Profiles:

  • Eduardo Alvarez is a Booz & Company partner based in Chicago. He leads the firm’s global operations practice and is an expert in business process transformation and technology-enabled transformation.
  • Steven Waller is a Booz & Company principal based in Chicago. He specializes in technology strategy and the development of new operating models for energy and financial-services companies.
  • Ahmad Filsoof is a Booz & Company senior associate based in Chicago. His focus is on operations, business process transformation, and technology-enabled transformation in the energy industry.
  • Also contributing to this article was consulting writer Robert Hertzberg.

 

 
 
 
 
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