Pwc Report
Spotlight article
Corporate divestitures: four guiding principles to optimize value
Introduction
Buying or selling a company is a complex process fraught with risk and uncertainty. That’s why buyers have historically used due diligence to help reveal hidden risks or opportunities that will help them negotiate a better price.
The frenzied markets of the past put the seller at an advantage because heavy competition for business hampered buyers’ due deal market, the smaller pool of likely buyers and increased demands from banks heighten the need for extensive buyer due ever, the seller shoulders the burden of being prepared. You must know what the buyer will need to know — or risk failing to close, missing value targets, or stumbling along a protracted timeline.
While sellers may think they know their divestiture target’s operations inside and out, they are usually too close to the business to look at it from a buyer’s perspective, making it stand-alone basis. This is particularly true when the target is part of a division or a product line and the business has been ignored or is underperforming. Failure to see the target through the buyer’s lens increases the odds that the buyer’s diligence at the negotiating table and destroying value while employees, customers, and stakeholders jump ship and head for safer ground.
A robust divestiture preparation process can help sellers successfully exit their businesses in a shorter time frame, avoid sale price erosion at the negotiating table, minimize distractions to the core business, and ultimately derive the desired value from the sale.
The four guiding principles of a successful divestiture
In a divestiture setting, one way to avoid value erosion is to design and implement a process that supports rapid deal completion. To accomplish this, most successful sellers in today’s market use a thorough process that follows the four guiding principles of successful divestitures: planning for all aspects of the
Corporate divestitures: four guiding principles to optimize value
Introduction
Buying or selling a company is a complex process fraught with risk and uncertainty. That’s why buyers have historically used due diligence to help reveal hidden risks or opportunities that will help them negotiate a better price.
The frenzied markets of the past put the seller at an advantage because heavy competition for business hampered buyers’ due deal market, the smaller pool of likely buyers and increased demands from banks heighten the need for extensive buyer due ever, the seller shoulders the burden of being prepared. You must know what the buyer will need to know — or risk failing to close, missing value targets, or stumbling along a protracted timeline.
While sellers may think they know their divestiture target’s operations inside and out, they are usually too close to the business to look at it from a buyer’s perspective, making it stand-alone basis. This is particularly true when the target is part of a division or a product line and the business has been ignored or is underperforming. Failure to see the target through the buyer’s lens increases the odds that the buyer’s diligence at the negotiating table and destroying value while employees, customers, and stakeholders jump ship and head for safer ground.
A robust divestiture preparation process can help sellers successfully exit their businesses in a shorter time frame, avoid sale price erosion at the negotiating table, minimize distractions to the core business, and ultimately derive the desired value from the sale.
The four guiding principles of a successful divestiture
In a divestiture setting, one way to avoid value erosion is to design and implement a process that supports rapid deal completion. To accomplish this, most successful sellers in today’s market use a thorough process that follows the four guiding principles of successful divestitures: planning for all aspects of the