Divestitures

On this episode Vamsi Maddipatla, the founder and president of LAXAI, shares the biggest lessons he learned from sell side m&a transactions, and what he did differently during buy side deals.

Kison speaks with Toby Tester, an M&A Consultant and Project Manager with over 20 years of experience driving strategic, financial and operational value through M&A.

Jillian Kaebel-Sis is an HR Global Mergers and Acquisitions and Divestitures Manager at Caterpillar who resides in corporate strategy and business development.

Undoubtedly, Human Resources deserves a seat at the M&A table. As more practitioners are taking culture, the change curve, employee satisfaction (a satisfied employee equals a productive employee), and employee expertise into account during deals, HR’s role continues to grow.

Divestitures have received bad press over the years because of management hubris. It’s well documented how hubristic managers splurge on value-destroying deals when business confidence is high, only for the buyer to later admit to their error in acquiring the assets.

Divestitures and investments are two sides of the same coin, but it would be incorrect to say that they’re similar. Divestitures bring a set of risks distinctly different to those present on the buy side which need to be understood.

Listen to the discussion about this topic from the M&A Science Summit here. A divestiture is often seen as far less exciting and glamorous than a traditional acquisition.

“The cardinal sin in a sell side process is taking something to market with numbers that haven't been vetted by somebody like me.”

Companies are looking to buy like never before. Between record amounts of ‘dry powder’ in private equity, capital relatively easy to come by thanks to more quantitative easing, and (for now) near zero interest rates, acquisitions are firmly on the corporate agenda.

The question, “What is your exit plan?” tends to draw blank expressions when asked to business owners.

Breaking up is good to do. At least, that’s the rationale behind an equity carve out (ECO), a transaction that involves creating a standalone company from one of its subsidiaries or divisions.

On this episode of M&A Science, Rhonda Rein, Director, Corporate Development at Thomson Reuters, shares her vast experiences in executing divestitures and how to make them work. She goes over how to evaluate the opportunity of a divestiture, its complexities, and when to start TSAs.

Divestitures can be complicated. During this session, Galina, Josh, Jillian, and Nitin share what they have learned from their past experiences with large scale divestitures.

Divestitures are a great way to add value to a company that impacts both the company procuring the asset and the seller as they both restructure themselves in a variety of ways. Although the technical definition of a divestiture is the disposal of an asset, by beginning to rethink that a divestiture is an asset and an opportunity for growth, you can reframe the idea of a divestiture as a disposal and see it as a chance to add value.

Lawyers must have a good grasp of what is for sale. Depending on the nature of the transaction, there are different risks and issues that may arise.