"Divestiture" Can Be a Positive Option for Companies of All Sizes

By Gregg Schor, CEO, Protegrity Advisors

It's not uncommon for companies to have subsidiaries, business units, products, or services that are no longer a strategic fit with the rest of the company. There are frequently emotional attachments to the business and the people involved, and management is reluctant to jettison the business unit. Even when management realizes that something should be done, they may not have the resources or expertise to analyze the options available, come up with a plan, and then execute.

But by not considering divestitures as viable option, business owners are missing out on what could make a material difference to their company in a variety of ways. Depending upon how it is accomplished, divestiture of a business unit if and when appropriate can yield substantial benefits, such as:

  • Removing management distractions and allowing more focused management attention in areas with better ROI
  • Improving operational inefficiencies
  • Generating short-term cash and reducing long-term expenses
  • Enabling increased budgets on core business areas

The following are examples of the kinds of questions that should be asked when deciding whether a business unit might be ripe for divestiture:

  1. Is there a fit with the current and future corporate strategy?
  2. Is the company holding the business unit back or vice versa?
  3. Does the business unit conform to internal processes? (For example, business model, capital requirements, or employee compensation structures.)
  4. Does the business unit require disproportionate management attention and company resources?
  5. How closely do the business unit's customers align with the rest of the company?

    Rather than continuing to support a business unit that is no longer viable within the company or, in some instances, shutting it down completely, there may be opportunity to separate and sell off that business unit to a third party.

To help business owners and executives navigate these issues, Protegrity Advisors has established a specialized "Corporate Divestitures" offering. We help business owners and executives confidentially analyze whether divestiture is an option that should be explored and, if the decision is made to move forward, provide proactive support in managing and executing all of the steps in the process, including the possible sale of the business unit.

For more information, please contact Gregg Schor at (631) 619-6745 or gschor@protegrityadvisors.com.


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