The Upside of Divestitures

Blog

 

Jeff Perry shares a post that identifies the positive potential of divestitures in a company’s growth portfolio. 

Houston, do we have a problem? While many companies talk about the need to regularly reshape its portfolio, divestitures are too often considered aborted missions. Quite the contrary, divestitures can be rocket fuel for other business priorities of the parent company.

Divestitures are unsung in portfolio-shaping. When businesses are rumored to be for sale, many questions are raised internally and externally: Why is the business on the block? Is it underperforming? Was it starved investment? Was required management talent lacking? Why would the business be of more value to someone else?

Divestitures are not typically afforded the buzz and attention of their M&A cousins. When companies announce major acquisitions, there is often great anticipation and excitement regarding how the newly acquired entity will drive growth, expand geographic markets, expand products and services, and/or improve supply chain efficiency. High potential leaders in the business lineup for roles to help in acquisition and integration processes.

When divestitures are considered, first, there are fewer people “in the know.” When it is more known that a business may be a divestiture candidate, in addition to the questions highlighted above, high potential leaders often run for the hills. People may experience changing allegiances throughout the divestiture process as well. While everyone starts thinking on behalf of the parent company, some will shift to wearing the hat of the divested business, especially if they are ring-fenced and going with the deal.

 

Key points include:

  • The barriers to overcome
  • Creating value
  • Capital raised

 

Read the full article, Divestitures Can Be Rocket Fuel, Not Aborted Missions, on LeadMandates.com.