Divesting and optimising

Put every bit value on the table

When determining the value of a business or part of it to be sold, you not only focus on the value, but also - and even more so - on its potential value. This is very important to prevent that you see your sold company (part of) being resold for a much higher price a few years later. So identify the opportunities for value creation properly and then make them explicitly clear to the bidders. This way you increase the chance of a maximum selling price. Two approaches can help you with this:

Identify and execute value creation opportunities before selling

If you identify and implement a value creation strategy before you sell your company, you will increase its EBITDA. And that is the value for which buyers are willing to pay real money. If buyers are willing to pay a multiple of, say, 8x EBITDA for your business, an increase in EBITDA offers exponential benefits up front.

Identify opportunities for value creation and tell the story

Implementing a value creation strategy takes time – usually two to three years – but there is a short-term alternative. If you as a seller identify opportunities for value creation in your company and clearly demonstrate and articulate these, you give buyers confidence that they can increase EBITDA in the future. As a result, they are often willing to pay more, especially if you also support this with due diligence.

When creating a value creation plan for a divestment, think like a private equity (PE) investor, even if PE is not your target audience. After all, PE investors are always looking for opportunities to create value. And to acknowledgment that any risks in the business that could negatively impact the value of the business in the future - such as a neglected IT system - have been addressed.

Don't neglect what's left

Maximising the value of divestments is only half the approach. Selling affects the remaining activities. And you have to tackle that if your core activities are to create maximum value. 

Limit stranded costs

Stranded costs - the recurring costs that persist after your business is sold - are a well-known drain on the value of transactions. Therefore, make a plan to limit those costs before the sale is completed. Consider, among other things, how the shared resources were distributed in the past, and what that should look like now. And see whether the divestment has consequences for purchasing power or economies of scale.

Realise what remains

Because the sale of your company has consequences for various business functions, it is wise to think in advance about what can and should be done differently after the sale. For example, can you downsize the finance function? Or is outsourcing of certain parts a more efficient option? An EMS (Execution Managed Services) solution may be useful to support and improve non-core activities, allowing your company to focus on the right value creation priorities. 

Reallocation of resources

Review how and where to focus capital, employees and management to maximise value creation in the remaining core businesses. 

Employees and skills

An acquisition is often the reason for talent to leave an organisation. With a convincing story - an ambitious business plan with plans for growth and seizing new opportunities - you can persuade them to stay.