How to Improve Your Acquisition and Divestment Strategy

Despite their huge potential to create value divestitures rarely achieve the expectations. This article outlines how companies can increase their chances of success and shift their portfolios into higher levels of.

The Right Time

When executives realize that a product is no longer supporting strategic objectives, it’s the right time to consider selling. Leaders who wait in anticipation could be at risk of a continuing decline in performance, and possibly lower purchase prices.

Transparency is key when communicating with employees about the intention and the implications of the sale. It is crucial to explain why the decision was made, and ensure that employees are aware their careers won’t be affected. It is also crucial to notify top customers within 48 hours of the announcement and to establish a designated procedure for handling issues that arise following the closure.

A well-timed sale enables companies to reallocate their resources and invest in strategic core areas. Neste, one of the Finnish oil company changed its name in 2015 to reflect its emphasis on renewable energy. It invested the proceeds from selling its oil and natural gas businesses. The company was capable of doubling its share returns in only five years.

The top divestors regularly review their portfolios for potential candidates and have teams that are committed to this job. These teams typically include individuals with specialized expertise, such as in the separation of accounting system and the implementation of service-level agreements between the remaining company and divested business. Additionally they conduct an in-depth analysis of the value created through any connections or entanglements between the business being sold and the rest of the portfolio.

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