Successful Divestitures Require Attention to More Than the Asset Alone

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Seller Must Provide Acquiring Entity with the Capabilities to Operate It; Booz & Company’s Ahmad Filsoof Details Five-Step Process for Successful Capabilities-Focused Divestitures in New Podcast Episode

It’s rare for a company to simply carve out an existing, stand-alone business or asset and sell it. Typically, divestitures reconfigure a business in a new way.

Divestitures are much harder than most companies might imagine, requiring sellers to look beyond simply removing a particular asset to focus on the capabilities the buyer will need to operate the divested business.

“It’s rare for a company to simply carve out an existing, stand-alone business or asset and sell it. Typically, divestitures reconfigure a business in a new way, particularly when they’re centered on singling out and retaining an asset’s capabilities to add value for the buyer and account fully for the implications for both the retained and the divested businesses,” says Ahmad Filsoof, a Principal at Booz & Company.

There are many components to a successful divestiture, but an understanding of the capabilities involved is a central requirement, Filsoof explains in Episode 47 of Mergercast by the Booz & Company podcast.

He recommends a five-steps process to make this manageable:

  •     Capability Scoping. Sets the overall strategy for the divestiture, identifying which assets will be sold, to whom and when – while taking stock of the most important capabilities associated with the asset that’s for sale.
  •     Baseline Analysis. A detailed evaluation of all of an asset’s components, from people to processes and technologies. This provides a thorough understanding of how the components of an asset’s key capabilities function together and breaks them down into their constituent parts. For example, who performs them, where in the company they are performed, how long they take, and what technologies make them possible?
  •     Option Analysis. Examines how to carve these systems and processes up, while balancing the needs of the retained business with those of the divested business and the company’s overall M&A goals.
  •     Transition Planning. This usually takes places when negotiations have begun with potential buyers and establishes a transition plan for which capabilities will be transferred to the buyer and how – including specifics such as how to fill resulting capabilities gaps within the retained business, plans for post-divestiture cost structure, and ways to address stranded costs.
  •     Buyer Engagement. Once a buyer is known and negotiations are underway, buyer engagement identifies how capabilities transferred to the new business will be supported by the retained business post-divestment. Often a buyer will remain dependent on a seller for a set of necessary services for a period of time, with this relationship defined by negotiated transaction service agreements. Mitigation of stranded costs over time is also considered in this phase.

Episode 47 of Mergercast by Booz & Company, titled “The Secret to Successful Divestitures,” has a run time of 16 minutes and 41 seconds. Listeners can play the podcast on its homepage ( or subscribe via RSS feed, e-mail, the iTunes store or Stitcher radio.

About Booz & Company
Booz & Company ( is a leading global management consulting firm focused on serving and shaping the senior agenda of the world’s leading institutions. Drawing on the talents and insights of more than 3,000 people in 58 offices around the world, we help our clients achieve essential advantage by working with them to identify and build the differentiating capabilities they need to outperform.

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Sharon Bially
MBS Value Partners
+1 (508) 655-2676
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