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Author's profile photo Michael Morel

Three strategies to maximize divestiture value

Every company needs a proactive divestiture strategy

Now more than ever, companies need to focus on strategies that reshape their organizational portfolios for success. During uncertain times, divesting strategies have become an increasingly powerful tool to help refocus on the highest areas of growth, proactively address noncore businesses, and provide the funds for needed strategic investments. The right application technology can empower your business to approach divestitures strategically, so you receive greater returns.

Lower risk to the buyer means a better price to you

When a buyer believes there is risk associated with the separation of a divestiture from a seller’s corporate IT systems, they will discount the value of that organization to take this perceived risk into account.  If the cost of separation is not clear, then this factor will also be taken into account when pricing is negotiated.  If there are concerns that the strength of the divestiture could weaken as the divestiture moves from seller to buyer, a lower price may be offered.  Finally, if buyers do not have total transparency into both Finance and Operations of the divestiture, they may reduce their appraised value to mitigate these uncertainties.  If you can effectively reduce these many aspects of perceived risk, then the best price will be yours.

Three strategies to take now

What can you do to minimize buyer concerns and ensure that their offer for your divestiture is the highest possible?  SAP has found that implementing three key strategies can make a big difference in how buyers perceive the value of your divestiture, and which will influence what they are willing to pay.

    By implementing a Cloud ERP solution at your divestiture, you benefit from the reduced cost of a cloud implementation, and you provide buyers with confidence that their investment’s separation from your corporate infrastructure will be quick and successful.
    Buyers will pay more money for an organization that will flourish once they have bought it. Intelligent ERP provides the strength and business transparency your buyer needs to be excited about their new acquisition.
    You will still need to manage governance, maintain control, and optimize operations while the target is part of your organization. By integrating Corporate systems with the divestiture, you can achieve an “independence with integration” approach that provides control and collaboration where you need it so your divestiture’s business performance does not suffer while you find the right buyer. When the time comes, this approach minimizes the separation effort.

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      Author's profile photo Joachim Rees
      Joachim Rees

      So this is about how to sell some parts of your company - interesting thought, thanks!