The acquisition and divestiture strategy is one of the most difficult aspects of managing an M&A process. It requires constant analysis to differentiate the difference between core assets and non-core ones. Without an effective strategy and a well-planned divestiture strategy, the cost of an acquisition can exceed its value by a substantial margin. Additionally, the cost of retaining non-core assets could also exceed their value. It is vital that managers invest the funds required to prepare and structure divestitures.
The first step in a divestiture is to determine potential buyers for the asset. Financial modeling and discounted https://onlinedataroomtech.com/datasite-for-buy-side-ma-main-advantages/ cash flow (DCF) analyses are used to accomplish this. Typically, this procedure is carried out by finance experts.
The process of selling can begin when the company has identified an interested buyer. This is an important step to ensuring that the company is able to sell the asset at a reasonable price. The company will be able to receive a significant amount of cash after the sale. This capital infusion is usually used to increase the size of existing divisions or to establish new business lines. It can also be utilized to pay down debt.
A divestiture can be done to get rid of a business that is not profitable. This kind of divestiture typically involves a carve-out, in where the parent company keeps an ownership share or spin-off, where the subsidiary is sold to shareholders as an independent entity. In both cases, maximising value is the aim. A successful divestiture requires a solid strategy for communication and taking into account the needs of employees following the transition.