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Shorten the Waiting Game – Closing Your Deal

Divestiture Survey Report 2013: Sharpening your strategy

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Getting a good deal for a carve-out should start with looking at the asset from a buyer’s perspective. Sellers should study financial and operating data well before they reach out to potential buyers so they can develop a strategy for addressing issues buyers believe will cause difficulty and diminish value once the business is separated and sold. But less than half of survey respondents (43 percent) indicated their companies evaluate individual business units at least annually to determine whether they should be divested. Forty-five percent only consider divestiture when there are performance or strategic issues. This lack of routine evaluation may cause companies to miss opportunities, or rush distressed units onto market without adequately preparing for a sale. 

Surveyed executives were more likely to list financial tasks as being important to bringing a deal to market. The top tasks named in the survey were prepare carve-out financial statements (74 percent), perform a detailed business valuation (74 percent), analyze potential deal structures and related costs/benefits (70 percent), and perform a detailed financial projection (65 percent). These are of critical importance for deal execution — getting from first bid to signing to closing — and often have a long lead time, with support needed from internal parties as well as from external advisors. But a variety of more intangible tasks — such as developing a strategic focus for the business, development and succession planning in the carve-out, and separation planning for achievement — can ultimately drive value for both the buyer and seller six months, one, and five years later.

Engage employees to boost morale 

Major challenges when attempting divestitures have to do with employees and communicating with them. Sensitivities with employee morale of the for-sale business was selected as a challenge by 93 percent of executives surveyed, with 46 percent indicating it was very challenging. Nearly as challenging was lack of communication with the organization on future plans for the business for sale, selected by 82 percent of surveyed executives. 

But many companies fail to address employee engagement and morale when planning a divestiture. When asked about important tasks to perform in bringing a deal to market, only 46 percent of executives surveyed chose establish a retention/incentive plan for management of business for sale. Short-term incentives based on performance milestones or a time horizon are effective for retaining specific employees and maintaining their focus. A divestiture often leads to ambiguity in roles and accountability, with conflicting priorities between the new and old companies, resulting in escalating levels of anxiety for employees. In Deloitte's experience, companies that implement an effective employee engagement strategy mitigate these challenges and bring their deal to market in a timely manner and more efficiently.

Read more about strategies for closing your deal and the importance of engaging employees to boost morale in the Shorten the waiting game – closing your deal chapter in our Divestiture Survey Report 2013

Dig deeper 

To continue learning about the key insights and findings from our Divestiture Survey Report 2013, access our results in the following ways: 

 

As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. 

Deloitte Corporate Finance LLC ("DCF"), member FINRA, is a wholly owned subsidiary of Deloitte Financial Advisory Services LLP ("Deloitte FAS"). Deloitte FAS is a subsidiary of Deloitte LLP. Investment banking products and services within the United States are offered exclusively through DCF.

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