Divestiture involves additional challenges, including costs, timelines, and disruption to business as usual.
- Our approach
- Stranded Cost identification
- Carve out & Organizational Stand-up Support
- End State Vision & Separation Strategy Development
- Transition Service Agreement Identification & Support
Deloitte’s approach for the divestiture and separation management process can help clients to rebalance their business model in order to better position the company for growth and reduce risks.
With experience we have mapped that our client’s key objectives in this process are:
- Maximize selling prices based on key levers to be explored with potential buyers
- Define a strategic restructuring on retained organization to remove any overhang
- Protect intellectual property, trade secrets and competitive advantage of retained businesses
- Replace services formerly provided by the seller and protect key talent
With years of practice in Brazil, Deloitte has developed and learned strategies on how to improve the divestiture process in Brazil. Main challenges faced includes:
- Lead time to set up a new legal entity and have them operational with all licenses, permits and certifications
- Infrastructure (e.g.: voice and data links) preparation presents long lead times when needed to be adjusted or installed in less developed areas
- Different registers in Brazil, such as properties documentation and register in Board of Trades, requires a long period to have them updated
Shedding peripheral businesses can leave the seller with a disproportionate cost structure relative to its new size. The company should be wary of loss of scale and duplicate corporate capabilities and keep a keen focus on controlling costs. Even if the need for cost reduction is apparent, management commonly fails at execution. The inability to deal with competing priorities during a time of transition, insufficient resources to execute, and a failure to follow through tend to plague CFOs in their bid to avoid saddling the parent with unnecessary costs.
Stranded Cost identification
Here Deloitte supports an organization in creating the plan to carve out the divested business unit and ensure it has the people, process, tools and organizational strategy to enable it to stand on its own.
Carve out & Organizational Stand-up Support
Deloitte supports clients to define the End State Vision: how business process and functions should operate after separation, including the support to design the appropriate End State of the shared resources, in case of a TSA. Deloitte support on the Separation Strategy Development will focus on supporting functions to develop plans necessary to achieve the End State Vision.
End State Vision & Separation Strategy Development
A Transition Service Agreement Program is important to support the identification and planning of services that will guarantee business continuity on Day One, if a company does not fully integrate all processes on Day One. This program is essential to make sure these necessary services will be fully working on Day One and that teams are aligned on how the processes and communications will occur during this period.
Transition Service Agreement Identification & Support
Examples of qualifications
Major agricultural processors for food, clean chemicals and alternate fuel: Engaged the divestiture of the South American front in a global carve-out of the Cocoa division, coordinating a SMO focused in Finance, Tax, Legal, Commercial, Operations and HR.
Life Sciences & Health Care
Life Sciences Conglomerate: Develop and execute the Diagnostics Business area spin-off from client to a buyer. Analyzed the requirements and potential issues specific to Brazil for Supply Chain, Procurement, Finance, and Facilities.
Major Tire Manufacturer: Help in the process of separating one of the client’s BU operations globally to migrate to a PE as a stand-alone business with a target date for launching the newly independent co.
Coatings Division of a Multinational: Provided divestiture advice and support for a multinational looking to divest their coatings division.
Major Heavy Machinery Manufacturers: Engaged to support divestiture initiative covering the diagnoses and actions to transfer responsibilities of HR, Finance, Assets, Commercial and services structures to the acquirer.