Successful Divestitures Need Proper Cultivation

Divestitures are often misunderstood as being a way for corporations to ¿take out the trash.¿ In reality, however, divesting can be a strategic decision that is profitable for both the parent company and the divested unit. Companies may choose to divest for legal, strategic or market-based reasons, and divestitures can take many forms, including spin-offs, carve-outs, leveraged buyouts and management buyouts. In any case, once a company decides it¿s time to divest, how the parent handles the divesting process is crucial to the success of the divestiture. In this respect, managers play a key role in building a relationship between the parent and divested unit, as well as in executing the process in general. Standardizing processes, creating strong incentives and motivation systems, and empowering a divestiture task force will facilitate the implementation. Understanding all of these aspects will help companies to optimize their change efforts.