Shorten the Waiting Game – Closing Your Deal
Divestiture Survey Report 2013: Sharpening your strategy
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.
To continue learning about the key insights and findings from our Divestiture Survey Report 2013, access our results in the following ways:
- Explore our interactive PDF and easily navigate from chapter-to-chapter to read about the trends that mean the most to you.
- Download our infographic and learn about some of the key takeaways in the report and the data behind them.
- Access our print-friendly report and read our chapters.
- Read online featured content from additional sections of our report:
- Economic uncertainty makes divestiture planning a challenge
- Strategic factors important in driving divestitures
- Raising the bar – receiving more value from your carve-out
- Finding the “right fit,” at home and abroad – foreign and domestic buyer trends
- Transition Services Agreements (TSAs) – planning now for post-close
- If at first you don’t succeed…consider putting your business back on the market
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