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Video: Now watch Deloitte’s Jeffery M. Weirens discuss divestiture best practices on www.bfmag.com
It has been a couple of hundred years since Benjamin Franklin uttered the axiom that “By failing to prepare, you prepare to fail.” In the context of today’s mergers and acquisitions environment, an appropriate paraphrase would be that the CFO who fails to prepare properly for a carve-out prepares to cost his or her company and their shareholders a substantial amount of money. Preparation and careful execution, as in most things, are vital to the completion of a successful divestiture.
To the inexperienced, a divestiture may appear to be like a merger in reverse, but this is a dangerous illusion. In fact, carve-outs are rife with their own unique challenges and are in many ways more complex than a merger or acquisition. Experience teaches us that becoming a prepared seller may boost the value of a transaction, sometimes dramatically. A prepared seller can close a transaction more quickly, allowing focus to remain on core business operations, but the benefits are not restricted merely to speed. By undertaking the necessary preparatory work, the prepared seller understands the intrinsic value of the deal from the buyer’s perspective. The seller will also become familiar with the level of effort required on the part of the buyer to transfer and integrate the acquired business. From a buyer’s perspective, the quicker a transaction can be executed, the more valuable a seller’s assets will be.
Below are five of the top challenges for a seller’s CFO in a divestiture and the actual actions taken by a prepared seller.