Pelorus

                  Divestitures

Divestiture of a business (product line, business unit, free-standing company) is a complex process that requires thorough preparation, skillful presentation and packaging of your company, identifying the right buyers, and artful negotiation skills. Divesting a business is a multi-disciplinary activity requiring the best efforts of your legal, financial, human resources and operational staffs or third-party professional resources.  It is very much a “team effort” from the senior executive group to operators on the shop floor.  For many within a company targeted for sale the divestment activities (preparation, marketing and closing) are first time, unique experiences.  One way or another, divestments can be high anxiety career events for all staff involved.  

Having an experienced hand on the tiller can greatly enhance the value of the transaction and mitigate problems and issues inherent in any divestiture process.  Pelorus has direct experience with over $1 billion in divestiture transactions:  seller due diligence, sale preparation, marketing, negotiation and closing.

The divestiture process proceeds through the following steps once the basic decision to sell has been made:

Step 1—Preparation for Sale

•  Conduct “Seller’s Due Diligence”
•  Establish and communicate the divestiture team structure and authority
•  Think through what information and data buyers will want when assessing your business; gather, organize and control
•  Although the market will ultimately determine the value of the company/business line, a pre-marketing valuation should be prepared
•  Align divestiture goals and objectives with key staff resources
•  Work with legal, tax and financial staff and advisors to focus on potential transaction issues and the preferred form of transaction
•  Identify likely buyers: financial and strategic.  Understand how your company may have unique value to specific buyers.

Step 2—Marketing

•  Prepare an Offering Memorandum that fairly and succinctly describes the company and highlights the value drivers and discloses know issues.  This is a critical document that can serve a seller well.  It should be accurate, inclusive, well-written and properly packaged.
•  Prepare a “data room” if appropriate in anticipation of buyer due diligence visits.
•  Establish and communicate the sale process and timeline and form for submission of bids.
•  Prepare and practice management presentations for buyer site visits
•  Actively market the company to the potential buyers.  Depending on the desired level of confidentiality this can be done covertly or very publically; seller’s decision.
•  Schedule potential buyer visits.
•  Secure bids with letter of interest/proposed contract.  Value bids with full consideration for proposed terms and conditions, tax implications, timing and the like.

Step 3—Negotiation and Closing

•  Work with all viable bidders to fully understand their bids and value offers.
•  Manage more detailed buyer due diligence for lead bidder.
•  Identify key contractual issues and resolve.
•  Finalize and sign sales agreement
•  Close