Sometimes, divestments don’t live up to expectations, despite their huge potential to create value. This article will explain how companies can increase their chances of success and shift their portfolios into a higher gear.
The Right Time
When managers realize that an asset is no longer assisting strategic objectives, it’s the best time to think about selling it. Leaders who wait in anticipation are at risk of a slowing down of performance and even lower purchase prices.
Transparency is crucial when communicating to employees about the intention and the implications of a sale. It is essential to inform employees of why the decision was made, and ensure that employees are aware that their jobs won’t be affected. It is also important to inform the top customers within 48 hours of the announcement and to set up a dedicated process for managing issues that arise following the closure.
A well-timed divestiture allows companies to repurpose resources and invest in strategic areas. For example, Finnish oil company Neste changed its name to reflect a focus on browse around this website renewable energy following the sale of its oil and gas operations in 2015 and reinvesting the profits. This allowed Neste to double its stock returns in just five years.
The top divestors are those who review their portfolios of candidates on a regular basis and have teams dedicated to this work. These teams typically include members with specific expertise in areas such as the separation of accounting systems and the implementation of service-level agreements for the remaining business and the divested one. They also conduct an in-depth examination of any connections or entanglements between the business being divested and their portfolio.
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