Figuring Out Your Divestiture Strategy

For those familiar with M&A, finding and acquiring new assets for your company is a vital part of its success. From a full on merger with a rival to a bolt-on acquisition of a specialized company, mergers and acquisitions bring new options and profitability to a business. However, the un-investment – the divestment – of these assets can be just as vital, as they stop being useful segments of your business. Figure out your divestiture strategy to help cut the fat from your company.

Reasons to Divest an Asset

There are three major reasons to divest a part of your business from the rest of your company: the assets lacks profitability, it no longer lines up with your core values/competencies, or the aspect is redundant due to a recent merger or acquisition. Some divestment candidates may fall into more than one category.

Divesting When an Asset Isn’t Profitable

When your company is suffering from a loss in profits, it’s important to track down the culprits. Through valuation you might find that a particular part of your business runs at a loss. If it’s not integral to your core business, it’s often worth divesting to improve overall company health.

Divesting When an Asset Isn’t Relevant

As either an acquisition or a change in company direction (or the asset’s direction), you might find that an aspect of your business has become a bit of a third wheel and no longer lines up with your core services or competencies. If so, is it really worth keeping around?

Divesting When an Asset Is Redundant

As companies grow and acquire additional businesses through M&A, they may find that several businesses under their umbrella perform identical tasks. Additionally, as part of a merger or acquisition, it may be a stipulation for the current redundant asset to be divested.

Segmenting Your Business

While for larger corporations, assets acquired through M&A often operate independently, and therefore it’s easy to track things like their losses and profits, core competencies, and redundancies. However, for smaller or fully merged companies it’s much harder to track individual segments of your business. If you’re thinking about divesting a part of your business, but are unsure about feasibility or profitability of doing so, it’s important to get the asset assessed.

If you’re looking to remove an asset or investment from your company, contact George & Company. Experts in mergers & acquisitions as well as business valuation, we can help you figure out the profitability of potential divestitures, as well as the best option for selling off the divestment. Learn more about our M&A process and services, and reach out to us for a completely confidential consultation to learn your options.