THE ART OF STRATEGIC DIVESTMENT

Patricia Anslinger, Justin Jenk and Ravi Chanmugan

Journal of Applied Corporate Finance, 2003, vol. 15, issue 3, 97-101

Abstract: Divestiture makes sense only as part of a sound, long‐term strategy. Before simply shedding business units, companies must consider all the options, and be willing to constantly review, replenish, and trim portfolios as markets change and evolve. In so doing, a company increases not only its flexibility but also its chances of adding shareholder value. This article examines the corporate restructuring “big picture,” in which divestments are only one alternative. It reviews additional measures besides divestments, such as outsourcing, joint ventures, asset swaps, and using new technologies to cut costs, and provides case studies of each. It also raises some interesting issues regarding divestiture, such as ways to sell a business unit without strengthening a competitor's hand, as well as strategies for improving a business unit's valuation in preparation for sale. The authors, who are M&A advisors at Accenture, conclude that “a carefully planned and well‐executed restructuring that involves divestiture can be as significant a victory for management and shareholders as a successful acquisition.”

Date: 2003
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