DIVESTITURES

Successful companies not only invest, they divest too. When they think about how best to manage their portfolios, they think simultaneously about which businesses to grow and which to shed. Looking beyond the stigma associated with divesting businesses, they see its clear benefits:

• Divesting non-core assets permits management to focus its attention on its core business and not its problem children.
• The perceived risks of earnings dilution and cash flow are generally less than the actual risk. Our case history is full of examples of companies that have divested assets and seen significant rises in their stock price post-divesture.
• The decision to restructure the portfolio creates a good opportunity to reshape the company's message to investors, employees and other interested stakeholders. A divestiture can act as a catalytic event causing management to take action that it has long known it should take.

Scientia's experience in divestitures

Our experience across hundreds of divestiture cases has taught us that to maximize a business's exit value, divestiture programs must be carefully orchestrated. Our approach to divestiture typically includes three phases:

Corporate strategy

• Articulate growth aspirations
• Decide where to invest and where to divest
• Assess whether you can separate the business to be divested, and draw up a separation plan
• Evaluate divestiture options (outright sale, spin-off, equity carveout)

Divestiture preparation

• Build the exit story (a compelling rationale for buyers)
• Create the road map to full potential (how the business will realize its full value)
• Design in detail the separation
• Set financial targets
• Harvest low-hanging fruit

Divestiture execution

• Value business to be divested and set walkaway price
• Screen buyers based on the business's value to them
• Conduct reverse due diligence and devise a buyer approach

To find out more about Scientia's work in this capability area, please contact us.