Corporate Divestitures

Corporate divestitures differ from the sale of private companies in many ways, and an advisor who is aware of those differences is best positioned to achieve a superior outcome for his or her corporate clients. Some of those differences include positioning carve-out financial statements, negotiating a transition services agreement and understanding the different needs and requirements of a corporate versus a private shareholder.

Corporate Portfolio Management Services

A corporation can be viewed as a collection of assets and other resources that need to be actively managed in the same way that a mutual fund manager sells the stocks of overvalued companies or those that no longer meet the investment parameters and purchases the stock of undervalued companies or those that are advantageous to the fund. Just as mutual fund managers who properly manage their portfolio often outperform the market, corporate executives who manage the company’s collection of business often outperform their peers. 

Types of Corporate Divestitures

There are many types of corporate divestitures, ranging from the highly complex to the relatively straightforward. The complexity of a divestiture is often inversely proportional to the size of the deal. For example, divesting a large, standalone operation with a strong management team and complete financial statements may be a simpler transaction than the sale of a relatively small, captive facility that lacks a management team and has never prepared financial statements. While the larger transaction may involve a higher purchase price, poor execution of the facility sale could result in significant reputational damage to the parent company that has an even greater financial impact on the parent company. 

What is the Process for a Corporate Divestiture?

Our corporate divestiture process can be broken down into six distinct steps. First, whether we are overseeing the sale of a product line, business unit or corporate subsidiary, we combine our decades of experience with industry research and management discussions to gain a comprehensive understanding of the industry’s dynamics and the divestiture candidate’s competitive position.

Second, since corporate divestitures may not have the necessary standalone financial information needed to present the business for sale, we work with the corporate parent’s outside providers to develop these statements and present the business in the most favorable, yet realistic, light.

Third, a business unit that is being divested may not have a sufficiently complete, experienced and motivated management team to effectively accomplish a divestiture. When this is the case, we work with the corporate parent to identify areas where the management team needs to be strengthened and properly incentivized.

Fourth, in consultation with the corporate parent, we develop a sale process designed to achieve the corporate parent’s goals given the constraints of the situation. This may be a broad auction of the company to both strategic and financial acquirers or a more targeted approach focusing on a select set of potential acquirers.

Fifth, regardless of the types or number of potential acquirers, we prepare high quality, professional materials to market the business in the most favorable light considering the company’s strengths, weaknesses, opportunities and threats.

Finally, from our first interaction with the potential client until closing, our Managing Directors remain actively involved in the sale process.

Let's Talk

Contact The Investment Banking Team

View All Team

John Waller

Managing Director 312.878.9167

Connect With
Prairie Capital Advisors

Subscribe to Our
Resources & Insights