Executive sponsor, separation manager and deal team
Meeting Agenda, Whiteboard, Strategy Documents
Spend one day or more to prepare materials for a two hour play.
The deal timeline and approach needs to be both aggressive and achievable. Executive decisions on how long the transaction process should take needs to be tempered by the practicalities of getting the business ready to handover. This is inevitably an iterative exercise where commercial pressures to dispose of the business needs to be matched with planning required to do the work.
If say, for example, the objective is to get a deal signed in six months. Then that should be the constraint placed on the program of work. All the work required to run the deal and separate the business needs to fit within that timeframe – unless, despite all efforts, there are internal or external reasons why this cannot be met.
The timeline should mirror the key events or decision-making points in the transaction. These then become the major phases for the transaction. However, there are other major events that need to be similarly phased, as these are often enablers for other major initiatives. For example:
An additional consideration is the concept of executing the deal in “waves”. Typically, the time required for activities like legal entity setup, and IT readiness varies across countries. Hence the deal execution may be split in multiple waves grouping countries based on their readiness. This helps ensure continuous progress in deal execution without being constrained by external dependencies, hence de-risking the transaction.
Typically a divestiture would have the following workstreams.
Workstream leaders can start to plan their areas in detail. Planning, in its widest sense, includes documenting all the deliverables and working out the order in which things go. For their workstream plans, the workstream leaders need to:
Within a divestiture, there will be activities that span across all functional groups that need to be separately identified, managed and controlled. The common cross-functional workstreams are as follows:
One of the key components of a divestiture is having an understanding of one-time costs. This may start off with a top-down budget by function or business unit based. However, it will be refined once planning for the divestiture effort gets underway. This budget should include all costs associated with the disposal of the business.
A divestiture is likely to create a good deal of organizational change. Staff can quickly become confused, anxious and fearful, either because of job cuts, additional work, loss of stature or the threat of a new boss. They may see only the risks, not the opportunities, and become more resistant as the change plays out. Communicating changes during a divestiture, therefore, becomes particularly important so that people at all levels get to hear what’s happening directly from the appropriate sources as opposed to rumor and innuendo. Culture is also a major factor, so any communication will need to take pay special attention to cultural issues.
Getting ready for deal close and transfer of ownership requires a particular focus so that the continuity of business remains unaffected on both sides. It, therefore, may be necessary to define Day 1 readiness as a separate stream in its own right with responsibility for coordinating all activities related to deal close.
Divestitures often result in an increased cost overhead for the seller company due to a reduction in economies of scale along with costs associated with the divested entity being left behind with the seller. These costs may adversely impact the ongoing profitability of the seller if they go unchecked. Costs associated with shared infrastructure, IT systems, real estate, headcount, third-party licensing/services need to be reviewed and rationalized as part of the divestiture exercise.
The governance structure comes into life when a rhythm of work is established through a meeting cadence. Typically a meeting cadence will be set up as follows:
There are no hard-and-fast rules on how, when or even if teams should meet all. It very much depends on the company culture. However, if meetings become ad hoc or infrequent, then it’s more likely major risks and issues will start to fester unnoticed. When this happens, what were initially small problems, could spiral out of control, significantly threatening execution of the deal. While some may see these meetings as a ‘bureaucracy’, it is often a necessary bureaucracy.