Clear the desk before you deal: The strategic timing of corporate divestitures

Manjot S. Bhussar, Michelle L. Zorn, Sridhar Ramaswami, Sidharth Ramsinghaney and Jasmine N. Kelley

Business Horizons, 2026, vol. 69, issue 2, 135-146

Abstract: Just as clearing your desk prepares you for a new project, firms must decide whether to clear their desks via divestiture before engaging in a new acquisition. Firms engage in acquisitions and divestitures to restructure their portfolios, enhance financial health, and focus on core areas. While traditionally studied separately, these strategies are increasingly recognized as interconnected tools for strategic realignment. Yet it remains unclear which order or sequence of conducting acquisitions and divestitures results in the best outcomes for firms. Analyzing a sample of acquisitions and divestitures by US public firms from 1995 to 2022, we examine when it is best to divest. Our evidence suggests that the sequence of these transactions significantly influences firm performance and that divesting prior to acquiring frees up critical financial and managerial resources that enhance performance. In addition, spacing out these transactions positively affects outcomes. Contrary to the traditional thinking of acquiring and then divesting, firms may benefit from clearing their slates via strategic divestitures before undertaking acquisitions. This measured approach allows managers sufficient time to successfully execute each strategic move.

Keywords: Proactive divestitures; Mergers and acquisitions (M&As); Business transactions; Strategic timing; Organizational restructuring; Organizational performance (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eee:bushor:v:69:y:2026:i:2:p:135-146

DOI: 10.1016/j.bushor.2025.10.002

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