Divestitures and carve-outs: Becoming a prepared seller
Given the uncertainty and conflicting data around the economic recovery, one of the leading trends we’re seeing among CFOs today is evaluating and rebalancing the organization’s business unit portfolio. And as CFOs review their portfolio of businesses, they should consider not only which businesses to grow, but also which businesses to shed. Divesting non-core assets not only increases strategic and financial flexibility but also allows sellers to focus their attention on the core business and maximizes overall shareholder value.
As credit conditions ease and valuations increase, companies are turning to divestitures to free up cash, pay down debt, finance other growth initiatives, and optimize their portfolio of businesses. In fact, Deloitte’s Divestiture Survey found 87 percent of executives polled expected a divestiture in the next three years, and divestitures are likely to increase substantially in the coming year.
In these changing times, the CFO’s role in a divestiture is also changing. Gone are the days of simply preparing the target company’s financial statements and shepherding the transaction.
Today, the CFO plays a vital role in ensuring that back-office processes, sales forces, and shared services are seamlessly transitioned, that transition services are optimized, and that the costs that should logically disappear, in fact, do.
This CFO Insights outlines some of the major challenges that a CFO may face as part of a divestiture, and some leading practices en route to becoming a prepared seller to maximize transaction and enterprise value.