Executing Divestitures

Divestiture is not the reverse of an acquisition, and it certainly takes more work and more preparation. In this episode, Rhonda Rein, Director, Corporate Development at Thomson Reuters, helps us understand where divestiture starts, how TSA work and what happens after close.

Executing Divestitures

9 Aug
Rhonda Rein
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Executing Divestitures

Executing Divestitures

“With divestitures, you're starting to disentangle something that's highly integrated and on paper. It can look simple, but when you start getting into the details it can get very complicated very quickly.” - Rhonda Rein

Divestiture is not the reverse of an acquisition, and it certainly takes more work and more preparation. In this episode, Rhonda Rein, Director, Corporate Development at Thomson Reuters, helps us understand where divestiture starts, how TSA work and what happens after close.

special guests

Rhonda Rein
Director of Corporate Development at Thomson Reuters (NYSE: TRI)

Hosted by

Kison Patel

Episode Transcript


I'm your host, Kison Patel, CEO, and founder of M&A Science and Dealroom. Joining me today is Rhonda Rein. 

Rhonda Rein is a Director in Business Development at Thomson Reuters, a former tax accountant. Rhonda has been involved in M&A transactions and integrations for over 16 years. 

From 2011 through 2019, Rhonda worked exclusively on all Thomson Reuters divestiture transactions. She has extensive experience with preparing and managing Transition Services Agreements, otherwise known as TSA. 

Currently, she is engaged in both acquisition and divestiture transactions and manages process improvements to Thomson Reuters, due diligence process, and other business development initiatives.

Today, we're going to talk about the Divestiture lessons learned. 

Maybe we could kick things off with a little bit about your experience and how it's been with divestitures? 

I'm a former tax accountant. I joined Thomson Reuters almost 20 years ago as the sales tax manager for our legal businesses. Part of my role was to identify the tax product codes in SAP so it would be taxed appropriately. 

We started doing acquisitions and the order-to-cash team would come to me and ask me, what should I code this? And I'm like, I don't even know what you're talking about.

So I started attending their meetings and learning more about what we were acquiring. And I realized quickly that there's more to the world, especially at Thompson Reuters than the tax department. 

Then maybe a year or so later an opportunity came up to manage that order to cash process for the legal businesses for those acquisitions. So I managed all of the numerous areas within order to cash for due diligence and then also the integration planning. 

A few years later, our accounting group decided that they wanted some oversight on financial integrations and more so setting up correctly in SAP, which is our main system. This was for all segments and globally. 

So I jumped at the chance because it tied my newly found M&A, in acquisition experience tied it with my tax finance background. So I did that for a few years. 

And then it was in 2011, Thompson Reuters decided to evaluate their portfolio and we identified some non-core assets that were going to be divested.

Well, the first project I worked on, I was working on it from a finance perspective, but the general manager of the business being divested was the one organizing the process. 

And I said, hey, I've been doing this for like five years now. There needs to be some structure. There needs to be some governance. You need some cross-functional representation from the Thomson Reuters side. 

We can't have the business being sold, making all the calls. I put together a proposal to create a new role for some oversight into this process. 10 years later, I'm still doing it. And ironically, it was supposed to be a temporary position.

And it's definitely not because we continue to divest quite a bit. From 2012 to 2016, we did almost 40 divestiture projects. Two major business segments, as well as a couple of larger carve-outs and then a smattering of smaller businesses and products. 

You're a divestiture expert. 

Nobody's an expert at divestitures because there's just, there's so much to know. So when I first created this role and first got into it, I was fortunate that we had a lot of acquisition activity as well. 

So we had designated or dedicated leads in almost all of the functional areas. So I pulled that team together and we said, okay, now we've got to look at the sell side, not the buy-side. What should we do? 

So we use basically what we use from a buy-side, but we quickly realized that this isn't the same, it's not. We know what we're buying and what we're going to integrate and what our end-state is. 

Well, we found that with divestitures, you're starting to disentangle something that's highly integrated and something that you haven't done before. 

On paper it can look simple, but when you start getting into the details of the technology pieces, it can get very complicated very quickly. 

So I do have to share a story, the first divestiture that I worked on, so it was a smaller deal. A handful of employees were impacted. We had a TSA, a transition services agreement in place. 

So really it was like nothing was going to change on day one, other than ownership. And that the employees would be the buyer’s employees under their employment and everything else  like system access. People are just going to continue to do their job like they had before.

We closed the deal on a Friday so that Monday, those employees came to work and their offices were cleaned out. No equipment, no phones, no access because they had been taken out of our payroll system. 

It was as if they were terminated even though we knew they needed to look and feel like an employee. So needless to say, we had to scurry and try to find some solution to that.

We did, unfortunately, it was manual. I was the one managing that process because it didn't get anywhere. And it took a couple of years to get the attention of our technology team to try to automate it because we started getting bigger deals and more employees. 

And it was critical that those employees had to have access to what they had done prior to close until their new buyer could get them on their own infrastructure and system.

What advice would you give to somebody that's doing this for the first time and doesn't know where to start? 

You have to go into it with an open mind. I was just talking with a colleague just earlier today about someone who wanted to get into the M&A, and they're like, Oh, they think M&A is all sexy and everything.

And that's fine if it's acquisitions because you always want to buy something, that's going to grow the business or enhance the product. 

When you're working on selling off a business, it's not the same. I say it's the least glamorous just because you're getting rid of something. 

And it's also for a good reason, but you're still, you're getting rid of something. You may not know what needs to be done but you have to start somewhere. 

So hopefully you have some kind of starting point, some kind of project plan and hope that you have some good resources that you can rely on. 

Because our company, we're very collaborative and I've been very fortunate over the years to have some really great people who are open-minded and willing to do trial and error.

If it doesn't work, then what will work? Let's try something else. We're adaptable. And just recently I've started to reconnect with some people because we hadn't had a lot of deal work last year and people are just energetic. 

It's just, okay, what's changed that we need to fix? Or what's unique about this deal? 

You can have a foundation, you can have some of the basics, but until you know the product you're selling, know the business, know the team dynamics, you really have to play it by ear and adapt to what the asset is that you're selling. 

It does come with experience. I think it's great that people have an interest in learning about M&A or divestitures, but you also have to be patient. You can't just expect that you're going to be an expert because you do one deal.

I think in most cases, you're probably more frustrated. Some of these young kids that are doing rotations and they want to have different experiences. They want to excel at everything they do. 

Don't expect that with M&A because you'll maybe, you knock it out of the park on one deal because it's straightforward or it's a large deal and you have external bankers and you have external consultants. 

But some of these smaller ones that you've got limited resources, it's just the business management team. There might be some nuances of the business that are specific to that business that we haven't dealt with before. 

You just have to really be open to be adaptable to like change and to welcome it and to expect things not always to go the way it's planned. 

Is it the same for international divestitures?

International gets tricky mostly from an employee standpoint because there are different trade unions and labor organizations. So the US is easy. I say that facetiously, of course. 

But HR counterparts would probably, like, wait a minute, what she's talking about, but for the most part, there are those issues with different labor laws, you have to have consultation periods. 

There's a lot of upfront work. A lot of times you have to get local legal counsel involved in the nuances in that country. 

And then the other thing that we've dealt with that's been challenging is particularly India and maybe some other countries where we've got established employees and offices and operations but the buyer may not.

It can take months and months for that buyer to set up a legal entity, to be able to take the employees on, to build benefit plans, to find an office location. And so that's where oftentimes we can get more complicated TSAs, like their TSAs. 

And sometimes we even have delayed closes. So what we do is close part of the deal, but we'll have what we call it delayed close, until that legal entity can be established.

What are some of the common misconceptions of what a divestiture is? 

First and foremost, I'll probably say it more than once, a divestiture is not the reverse of an acquisition. It's like nails on a checkboard for me when someone says it and I get it because M&A can be kind of a niche business as it is.

But divestiture is like a niche inside the niche. It's a portion that a lot of people just haven't had any awareness of or any involvement with.  

I know even some of our leadership when I've maybe made a comment to someone that, yeah, we've done 40 deals to date. And they're like, well, I thought we just sold this and this. Yes, that's what we announced to be sold but we have sold 30 other things since then. 

It's just an awareness. And we don't always announce, we typically don't announce externally unless it's something large and public, even internally we don't. So it's really getting that communication out there.   

But it's not the same, it's not the reverse. I think also for divestitures. I don't know if people, because they just don't know enough, but there is more work than an acquisition. 

Because not only do you have to come up with that plan for disentangling, but there's the TSAs. 

We have a TSA for almost every deal that we do because usually, the product of the business that we're selling may need time for the buyer to get itself in place or have time to migrate and some areas take less time, but technology is always a big one. 

Whereas when we acquire, I haven't been involved in acquisitions up until last year, but from what I know, we typically don't have any type of TSA. So we just say, Hey, we're buying this lock stock and barrel. And then we figure out how we're gonna integrate.

Whereas from the sales side of it, we almost always have the TSAs. That can go on for usually at least a year and the longest I've had is three years. It gets tiring. 

So we don't just haphazardly just get rid of something. There's a lot of thought that goes into analyzing our portfolio, really considering what we feel is non-core and why? We regularly review our portfolio to find out what's not strategically fitting right now? 

And the businesses are really responsible for at least initially identifying that. And then they have to prepare their financials and their marketing materials.

This is a great business, but here's why we can't support it right now. They might not be growing for us. You might not want to throw capital at it. We just don't, like I said, just don't have, haphazardly say, oh, it's time to divest XYZ. 

Is there an ideal period of when an organization should do that review? Is that like an annual thing? Quarterly thing? 

Our business segments are continually evaluating as time permits. And in fact, last year there was quite a deep dive into almost all of our products just to say what fits of what doesn't? There's thought that goes into it. Our leadership's very supportive of it. 

We want our business segments to be successful. And if there are these little pockets of businesses that maybe it was an acquisition that just didn't get fully integrated, just really didn't recognize the synergies, but it's a good business if it were managed by somebody else. 

Things like that, we want to take into consideration to see where there is a good home. That's our main objective is to find that good home. We want to make sure that the employees are happy, that our customers have a seamless transition. 

And sometimes we might sacrifice some value for that because we know that this buyer is going to be able to build this product, to grow the product, to get revenue, to make our customers happy because our customers, we have a lot of products.

If we're selling one or selling a business, they likely have more. So we want to make sure they're happy and help them to transition to this new buyer. 

Are there any other components on how a divestiture would fit into a company's overall strategy?

If it's non-core, we try to be clean, like for example, years ago in our tax and accounting business, we wanted to focus on software. So the service businesses just didn't fit the strategy at that time. That was one overarching strategy we had. 

But it really is up to the business unit. And sometimes too there has to be the consideration of what do we think we want to buy, or what are we going to build? And then depending on that, build-buy strategy, how does that impact the existing business? 

And so there might be places where either, maybe that existing business that maybe was thought of as non-core would now be more core with an acquisition or additional investments. 

What triggers the shift?  

It's our customers. We want to make sure that we're providing the best quality of product, the most value we can give to our customers. They're the main view of what we consider core and what's not. 

So we really want to make sure that the customers are getting what they want and what they need. 

Let's say you decided that this business line no longer fits your strategy. What happens then? 

The business will present it to their leadership. If they approve it, then business development, my team, will get involved and start the process.

So we'll work with the business team, which will basically be the business lead, technology, product, HR, finance, and any other key managers. So there'll be kind of like the core business team. 

And so they'll polish up their financials, they'll get their business overview done, kind of get it ready to launch out to buyers. In larger deals, we always get an external banker. That's what they do, they manage that sales process. 

And I or our business development team will help shepherd the internal team through that. But for the most part, the larger deals are led by the bankers. 

We always have external legal counsel. I shouldn't say always, but the majority of the time we do. So business dev will manage those external relationships. 

For some of these smaller deals, we may have a banker if we're going to have multiple buyers because they do help manage that relationship and be able to compare and contrast and keep those different buyers kind of segregated. 

Whereas sometimes, it's been more recently, we might have somebody approach us. They're like, Hey,  are you willing to sell X, Y, Z? I was like, let's think about it. 

Or we might say, we've identified this as a non-core asset. Who would be a good buyer? Or who would be a good placement? So we might reach out to someone as well. 

And so when we're kind of one-on-one or working with one buyer and depending on the size. I'll manage the process. We won't get a banker involved. During the process we get the due diligence materials ready, we get a data room ready. 

I do have to make a plug for High Q, which was a 2019 acquisition for us. We use our own product for our virtual data rooms. And so we go through that whole process. 

And then as due diligence is progressing, we're also working on purchase agreements and all the legal documents in parallel.

But at some point we need to bring in the shared services, a lot of the technology folks, and maybe there's additional finance or billing. That section's not dedicated to what has been identified as the asset to be sold, but they have input into it. 

And there'll be a TSA for that piece of it. That's where really a lot of my strength lies is in creating the TSAs and getting service descriptions, costs, reasonable terms.

We are very open to help out the buyer. We always say that the TSA is accommodating the buyer. I’m trying to help facilitate the sale. Let them know that on day one, lights aren't going to be turned off and that's going to be business as usual. So don't worry about it. 

We do try to limit the amount of services though because you offer up a menu of 20 items, people are going to take it. The offer of 10, they might ask for 12, you might say, I'll give you 8, they negotiate that. 

But we're not a service provider, Thomson Reuters isn't a service provider. So we also make it clear that you're going to get the same level of service that you had prior to close. So if you didn't like what you had we're not making any changes.

We're not adapting how we're going to do something. Most of the time that's acceptable. Sometimes, some buyers are like, why can't you do this since we don't have the wherewithal to be changing our billing systems, for example. 

You know, we just can't do that. It's just too extensive. And so we just have to come up with a way to help them continue their business. But it also motivates them. They don't like what they've got with Thomson Reuters, then they need to get it onto their own systems. 

Sometimes it's just not technically possible. It's just, it is what it is. And another point from our approach to the TSA. Since we're not a service provider, we're not marking up tests, we're not making money on TSAs.

We’re probably losing because a lot of times we'll include things like license costs and just the true incremental costs of providing that service for the business that was sold. But a lot of times we don't even include the people cost. Doing it out of the goodness of our hearts. 

Because again, we want that successful transition because our customers are the ones that are going to be impacted if we're not partnering well with the buyer. 

I want understand what makes divestitures so hard?  What really makes it so complex? And I want to also get a sense of, is this in the beginning stage when you're prepping the company to sell, or does the complexity come later? 

It depends on the business. Because sometimes at face value, I'll give an example. We had a product or a business that we had up for sale a while back. And I hadn't been involved in the beginning of the transaction. 

We had a buyer, we had someone approach us. They wanted to buy it. And then for whatever reason, it didn't work out. 

So then we put it out for sale and then we found somebody who was interested. I was unaware that we hadn't really dove into the product itself. 

And it turned out that the complexity of the product we had, some homegrown components, we had third party licenses. 

And so there were all these components that made up this product and the potential buyer looked at it. They did some extensive due diligence and just finally said, 

Oh, we can't make this work. You guys get your licenses, you guys have this enterprise model, you get a great deal. If we were to replace that, it's going to cost us and times the amount. 

We should have gone through that exercise before we even put it up for sale. But I think that we didn't because we think it was a competitor who was like, Hey, I'll take it. And then it just didn't pan out. 

So it's really important to identify the assets and then that will help with the complexity of it. 

But even if we think we've got all the T's crossed and I's dotted, as you start separating, you might see things that you didn't know existed. I think that's what makes it complicated.

Like I said earlier, when you're integrating, we know what our billing system is. We know what our CRM system is. We know what we need to do might take us some time to get there, but it's like, oh, we have to convert this data into this format to load it in our system. 

But one, sometimes we just don't know what we have to untangle. And then the other piece that complicates it is the buyer needs to drive what they're going to do with it. 

So if they don't have a clear end-state or a clear migration plan, it makes it difficult for us because we don't know how to help. So we're just going to be like, okay, it's going to be business as usual until you tell us what you need. 

That can get frustrating because the buyer may be looking at this as a great product. I'm launching it. My sales guys let's get out there and sell, but what about all the back office? How are you going to move the back office off so we can get out of this TSA? 

So they might have competing priorities that might delay. They might be inexperienced, they haven't done it before. So a lot of times our team is very helpful about that. 

And I don't know how many times people will come to me saying, my counterpart at the buyer is asking all these questions, is it okay for me to give them advice? 

Do you think it's legit and it's going to help them? Yeah. By all means, we don't want to just be like, oh, we're not going to help you if we want to be successful. 

 So the first part is really preparation, particularly defining what exactly you're selling? And this is maybe when you're creating those financials around this business that can stand alone and also the operating model.

And then because we're so integrated and because we've got this enterprise model with all these shared costs and allocations from a financial standpoint. 

There are all these pieces that might go in there, or they may not, or people don't exactly know what's coming from where? 

So trying to carve out those financials, it gets complicated. Also, it depends on if it's a legal entity, if it's an asset or a stock deal. Carving out assets is one thing and sometimes it's very obvious what it is. 

Oh, you're going to get these employees that support the business. You're going to get their computer equipment. You're going to get a couple of servers. Boom, go. 

But if there are different legal entities involved, we may or may not sell that legal entity. We might have to take some of the legal entity and carve it out and put it into another legal entity or they're going to have to create one.

So you get that legal entity piece in there too that can really create challenges. 

I was a sales tax person or indirect tax person for most of my life, not a direct tax person. So I'm glad we have expertise in that because it can get complicated, especially, different countries and different ownership of assets.

So there's a lot to be thinking about in that case too, so that can complicate things. 

How early are you starting to think about TSA?

Pretty close to the front of the process. The initial, probably, two, three weeks of gathering, the due diligence, getting the data room ready, getting the management presentations, the management team, the business team. 

There'll be some sessions with the buyer on certain topics or certain functional areas. But I like to tell the business team who for the most part, and a lot of them have not been involved in a deal before. 

So it's really important to lay out what the process is and help guide them through that. I start taking it for granted with, oh yeah, just get the due diligence materials. And it's like, what do you want us to gather? 

And the buyer should really be the one providing that request, plus cause that's what we do from a buyer’s side. 

But if you don't have a sophisticated buyer, we sometimes have to be proactive. We're going to need this financial information, but I need this operational information. So there's a little educational aspect too with the business team. 

But what I like to tell them is okay, as you're gathering this, 

  • What's gonna transition to a buyer? 
  • What's not going to transition? 
  • What do you rely on? Do you rely on our centralized reporting?
  • Our FP&A team?
  • How integrated is your billing? 

And some of our business units have their own standalone billing and maybe it's for a regulatory purpose or it was an acquisition, but if it's not, then we have to figure out, okay, how are we going to separate that out?

How are we gonna carve that out? How long is it going to take us to do it? 

So I want them to be able to think about what's shared, and then I can bring in the expertise from those areas to say, okay, here's what business X has identified, what they think is a need. Now, this is your area, how can we help them? How do we determine what they're going to need for TSA? 

As we start approaching a letter of intent terms, what are other components that would come up for divestitures? Is this where TSA starts shaping more as we get to LOI or does that come after? 

You usually get the LOI or the IOI before we start due diligence. That's what kind of kicks off due diligence. And so then, through the due diligence process, and as we're drafting up purchase agreements, the terms in the IOI or LOI might change. 

But for the most part, that's what we're operating under is whatever that LOI or IOI was from the potential buyer. 

 I feel like the terms of the TSAs, a lot of the values behind the deal could be really dependent on what kind of terms you have. 

I don't want to be in the business of TSA. I'm going to keep the scope as limited as possible. But to your point on that, we do the best we can. We anticipate what we can to the best of our abilities.

Because even though we get some shared service involvement, there might be some frontline resources in the business that we can't get to.

I mean, we just, you're not in the circle of trust or under the tent and so we have to make assumptions. We do the best we can to anticipate what we think we're going to need. 

We do always have, like broad terms within the body of the TSA that will state, we missed something, we'd use reasonable efforts to do blah, blah, blah. 

Because oftentimes, when you start separating and it might not be 30, 60, 90 days into the TSA where you discover something, maybe it's an annual process that somebody does. 

Oh, I totally forgot about that. We're not going to say, oh, it's not in the TSA, so we're not going to do it. You just adjust as you go through. 

And we always have a language to cover, like if there's a third-party expense for something that we didn't know about. 

We should be able to pass that through to the buyer or consult with them beforehand. And we have language, legal language that will protect those unknowns. 

Any other unique considerations when it comes to divestitures or activities outside of that? 

Just to close, to finish off soon and we're negotiating the purchase agreement. The TSA it's never going to hold up a deal, it just won't. If we have to make accommodation on our side, we will. 

Is it just one TSA or do you have multiple TSAs? 

When I say TSAs, so we've got the legal agreement, which is the TSA, and then we have a TSA schedule of services. So within that schedule of services, we have it broken down by functional area. 

So if we offer finance or billing, we'll have posted, we'll have a cloud service provider, we'll have employee technology, play access, laptops, things like that. Typically we don't do HR services.

But we may if there's some issue with another country like they don't have a legal entity, they can't take employees on, or there's a delay in creating benefit plans or again, the legal entity. 

So each area of the TSA schedule will have its own term. A lot of times the terms are the same because they have to. You can't take off hosting before you finish something else or vice versa.

But then there are some things too, that might be like the low hanging fruit, they just need to transition to marketing something, and we can do that in 30 days. 

So that might be something that it just be at, it's not really a condition to close, it really truly is a transition service. 

And some of the things that I guess maybe this is a misconception that I just thought of right now is that part of the purchase agreement is going to be the purchase of the books and records of the business.

So extracts of our billing, our financials, all of that. That's the part of what you're getting when you buy the app. We've had some buyers say, no, we want this written up in the TSA. 

And I argue, just did this two years ago, and it was painful we finally gave up. But it was like, Okay, fine. It's not a transition service. It's not something that we're doing on your behalf until you can move it. 

This is something that we have to do as part of the sale, but we finally just said, we're wasting too much time arguing on this basic point. Fine. There was no charge for it. They just wanted it written up. 

So anyway, once we get to the point where we're ready to sign the deal, we almost like to sign and close at the same time, but there might be things that happen. There might be some regulatory review that needs to happen. 

So we can't, as I mentioned, the buyer might need to create a legal entity.  We can't transfer those assets until that entity is in place. So those would be things that we'd have under the TSA as well. 

That sounds like a lot of things to negotiate in these TSAs is most more than the agreement itself?

I wouldn't say that. It sounds like a lot because this is what I do. So I'm very passionate about it, but believe me, I've been on those calls when they're negotiating the purchase agreement and now TSAs are easy compared to that. 

What happens after close, which responsibilities come up from your lens on working the divestiture side? Obviously, there's a component around communications. 

So as part of, as I work with the business team, the shared services we're working on the transition services agreement, the purchase agreement along with that same time too is the communications plan. 

It's really partnering with the buyer. What's the employee com plan? What's the customer com plan? So that's all happening where our corporate team is phenomenal, but then they partner with the business, HR, and business leaders and get it all set. 

So come day one, which is the close date, or maybe it's the day after, in some cases, they go through this laundry list, this whole communications package. So that'll happen. 

Everybody is happy with their new home. Buyer leadership has given their spiel. And for the most part, the business team, if they weren't part of the transaction, they're just going to go on and do their day-to-day job. 

Any of the lawyers and all the consultants, they're all done. Money's in the bank. Great. We're done. And that's where my work starts. 

I manage the oversight of the execution of the TSA. As well, sometimes for, like I said, 30, 60, 90 days there really isn't much for our team to do. 

They just keep the lights on, keep everything going. But in the meantime, we have to be pushing the buyer to get their migration plans and to tell us what they need and that piece of it, that transition services execution can go on for months and years.

And do you want to make one comment that I think I forgot to mention about the business team is that I think I did say that many of them have never been through a divestiture before? 

So there's that educational component that business dev really needs to make sure that we have a process in place that educates them. But they have day-to-day jobs. 

They have to keep running the business that we're selling. I mean, they still need to keep generating revenue and doing everything they did prior to us deciding that we're going to divest.

And it can be challenging for them because deals can be demanding. We can have short timelines, we can be throwing a lot of requests at one or two people because we've got the small team.

So it really puts a lot of burden on them to compile this information, to gather it, to get to the right people that they can get to. 

They might be like, oh, this person over here is the one who's going to have this answer. And if I can't bring them under the tent, how am I going to get this information?

So sometimes we have to be creative on how we approach it, but sometimes we have to make assumptions. 

What's worse, the distraction and prepping a business or business line for sale or that confirmatory diligence period?

Since I've never been in a business, I can't speak to that. All I can say is I've been very fortunate that the business teams that I've worked with have all been very cooperative.

In fact, we just closed a deal on June 1st and the business team just really did a fabulous job and that's been my experience and they want the business to succeed, especially if they're part of it. 

And then they really want to make sure it's successful. We've had a couple of deals where early on, we had the management team working on the transaction and they were actually part of the asset that was to be sold. 

And it was interesting because initially, it's just they're putting together all the materials to say, look at our business, this is great. Then once he started having conversations with the buyer, do you know who it's going to be?

They start getting a little bit, buddy, buddy with them. And loyalty shifts so that all of a sudden it's like, oh, well now this is who I really want to impress is this buyer. 

Maybe I'm not going to represent Thomson Reuters as much as I should because now I'm focused elsewhere. 

And so that's where we learned that we have to if we have people that are part of the asset that we have to make sure that we've got Thompson Reuter’s representation on those who are staying. 

So we can make sure that, Hey, we're not doing something we shouldn't be, we're not promising something that we can't deliver. 

We learned early on that we have to make sure that we have governance on the Thomson Reuters side that's going to be post-sale. It's still going to be us after the close.

What are other big challenges you face during a divestiture? Is it the people side, the process side? What's the hardest part? 

As I said, the people side of it, and it's only because a lot of times we're limited to who we can bring into the process. That's always a challenge. There are difficult people and for the most part, I've been lucky.

Sometimes there can be external counsel or someone that just kind of has maybe some unrealistic expectations about what should be happening. 

And so they might be asking for things that just aren't reasonable or realistic, and they might just dig their heels into it. 

And it's just no matter, you can explain the three different ways and they still are just not listening. They keep asking to get a different answer and it's just, sometimes you just can't do it. 

But it's really a thing just not being able to bring the people under the tent. That's really one of the biggest challenges. 

Looking back, what would you say are some of the biggest lessons learned purely from doing the volume of divestitures you have? 

As I said that first deal we did when the employees were no longer in Thomson Reuters payroll, that was a big aha. We ended up getting a solution that worked. 

The recent deal that I mentioned about really not having a good idea, what was in the components of the product? 

Really not knowing that we had licenses and homegrown and different components that all were together and not being able to have a good presentation for the buyer. We'd worked through it with them. And that made us look bad. I mean, it all worked out.

It was fine, but it's really, and I know like, every seminar we'll say, know what you're selling, know what you're selling. Clearly define the assets, but it's true. It's true. Because in that case, it could have been worse than it was, like I said, it worked out. 

And then ironically with our employee access issue, something happened with this deal that we just closed, that I literally had, I don't know how many emails I had over the past day? 

And so we need to do a little debrief on what happened because I hear they assured the business. They assured the buyer, oh, no problem. We have a process in place. Come Day One, everything you'll have the access you need, no problems.

The exact opposite happened. Best laid plans. You think you've got a process in place and something happens. Every deal is different. And then there may just be some little nuance that may never happen again. 

But I try to do debriefs with the team for most of the deals, if not all, even if it's just a simple, send them a little survey saying what worked, what didn't, and what could we do better? And then try to write it up if I can. 

The learning just continues deal after deal, regardless of how many you do. 

It's true. I feel very confident that if something new comes about it's okay, we've adapted so many times. I think it could get a little unnerving if you're new to it because you don't know what you don't know.

When we first started with our process, as I said, we started with what we were doing with acquisitions and then said, this is similar but different, but we have to realize that we don't know what we don't know. 

So let's move forward and just try to peel back the layers and figure out what we've got here, and then we'll figure out what we're going to do with it and what the buyer needs? And you just try to match those two together. 

You have to be open for change and you have to be able to have crazy hours, but then you take advantage of the LOLs. And back in the day, we were doing, whether we had like a dozen deals on my plate at one point. 

And granted they're in different stages, you have to be able to go from one to another in the same day and they can be drastically different businesses. 

When we first started, I mentioned that we had a dedicated M&A team, so that makes it easy when you have expertise in multiple functional areas. 

I know little about a lot of the areas, but I don't have that expertise in HR or in billing and so that's where you just have to know who to pull in. That makes my job a lot easier when I have expertise within the company. 

What's the craziest thing you've seen in M&A? 

On the acquisition side, you probably get something more interesting and crazy. 

But I was trying to think about this and yeah, divestitures are boring, but it's the least glamorous job you're gonna have because you're selling something, not acquiring and getting all excited about new sales.

You're like, oh, we have to get rid of this business and there are reasons behind it. And then when you have to work on a TSA. 

I don't know how many times I've had to say to people, ‘cause they'll come to me and say, why are we doing that? We don't even own this company or that we don't own this product anymore.

And I say, because we're legally obligated under the transition services agreement, it's kind of like, leave it at that and do it. Yeah. I don't think anything too exciting or crazy. Unfortunately, now I'm going to be looking for something crazy to happen. 

So hopefully I covered what you wanted. I could go on and on, but I'll miss stuff I can ramble. I shouldn't have said it's boring. {The least glamorous role is probably the better way to put it, but it's fun as nerdy as that may sound, it's fun to have all that different. 

I relish change and challenge myself to try to problem-solve some new issue. It's exciting work if that's the type of person you are. My husband's a stereotypical accountant and I tell him there's no way he could do my job for a day or a week. 

Cause there's just too much, schedules are constantly changing. Things are coming out of the woodwork. It's not routine, it's never routine. 

Ending Credits

Thank you for taking the time to explore the world of M&A with our podcast, please subscribe for more content conversations with industry leaders. 

If you like our podcast, please support us by leaving a five-star review and sharing it. I enjoy hearing feedback and connecting with our listeners. 

You can reach me by my email, it's kison@dealroom.net. M&A Science is sponsored by Dealroom, a project management solution for mergers and acquisitions. Additional educational content is available on Dealroom's blog at dealroom.net/blog. 

Thank you again for listening to M&A Science. See you next time.

Views and opinions expressed on M&A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.

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