Carve-outs, spin offs, and the outright sale of business units can represent tremendous opportunities for companies. The prospects range from realigning the product portfolio (to focus on current or new goals), to freeing up cash for initiatives more closely aligned with the business strategy, to improving shareholder value.
AaronRichards provides counsel and resources to guide clients through the divestiture process, minimizing the inherent risks and maximizing value creation and capture. Our approach is built on the methodologies, resources, and best practices that ensure success—at each step along the way—and delivering desired outcomes. We offer a four-pronged divestiture process: corporate portfolio strategy, preparation, due diligence and execution, and separation and value capture.
Corporate Portfolio Strategy
The first step in developing a divestiture strategy is a comprehensive review of the business portfolio to identify potential opportunities for value creation, taking into account the business strategy, economic climate, and regulatory environment. AaronRichards consultants work collaboratively with senior executives to evaluate the portfolio in light of all corporate and environmental factors and make recommendations about which assets to divest, why to divest them, and what is the best timing.
Our comprehensive planning process ensures that the divestiture transaction is positioned to create the desired value. The process takes place in two concurrent initiatives:
· Due diligence (sale preparation): AaronRichards assists with private sales, initial public offerings, and spin-offs, often joining forces with already involved legal firms, banks, and other financial services firms. We partner with clients to prepare for the sales process, focusing on developing an attractive value proposition for prospective buyers and streamlining the experience for all parties. Our value is in leveraging broad market knowledge, augmenting it with additional market research, consolidating internal data, and shaping an attractive divestiture story. We also advise on how best to prepare for the due diligence process, including crafting communications strategies and defining the optimal structure for materials sharing.
· Separation planning: Separation planning requires focusing on the long-term strategic objectives of the seller and the divested business to limit the inherent distractions that occur with divestitures. In addition, there must be strong focus on managing the divested business to capture all potential value during the sale. Separations can be complicated. The operations and processes of the divested business are inevitably commingled with the parent company, with functions such as operations, HR, IT, finance, and sales likely being shared. This means executives from across the company must be involved in planning the separation. AaronRichards involves the various parties at the right times, maximizing their contributions and minimizing the negative impact on operations. We partner with our clients to develop a thorough transition services agreement that ensures a smooth separation process once the deal closes.
With plans in place, we support a due diligence and sales process that minimizes time to close and maximizes the potential to obtain the desired price. Our contributions at this stage—in collaboration with the client’s divestiture team—are primarily focused on building communications and negotiations strategies. The strategies include introducing potential buyers, preparing communications materials, developing internal and external announcements, and supporting purchase agreements and transaction services agreement negotiations.
Separation and Value Capture
When the deal closes, we help coordinate a separation process in which plans are executed in keeping with previously established covenants. We ensure that the divested business is positioned for future success, the buyer is satisfied, and any restructuring required within the selling company to accommodate the separation is handled successfully. The critical success factor at this stage is to ensure that maximum value has been captured, according to the strategic, operational, and financial goals defined at the outset.