The Acquisition and Divestment Strategy

The acquisition and divestiture strategy is one of the most difficult aspects of managing an M&A process. It is vital to constantly analyze assets to differentiate between core and noncore assets. Without a clearly defined strategy and a well-thought out divestiture plan, costs of an acquisition may exceed its value by a substantial margin. The cost of maintaining non-core assets might also outweigh their value. This is why it’s essential for managers to put the required resources in preparing and structuring divestitures.

The first step in a divestiture is to find potential buyers for an asset. Financial modeling and discounted cash flow (DCF) analyses are employed to accomplish this. Typically, this is carried out by finance experts.

The process of selling can begin when the company has https://onlinedataroomtech.com/acquisition-and-divestiture-strategy-and-evaluation/ identified a potential buyer. This is an essential step to ensure that the business can sell the asset at a fair cost. The company will receive a large amount of cash following the sale. This cash flow is often used to grow existing business divisions, or to pursue new lines of business. It may also be used to pay off debt.

A divestiture can be done to take down a non-profitable business. This type of divestiture usually involves a carve-out, which the parent company retains an ownership stake or spin-offs, in which the subsidiary is sold to shareholders as an independent entity. In both instances, the goal is to maximize value. A successful divestiture requires a solid plan for communicating and consideration of the needs of employees following the transition.