Use analytics to support separation and RemainCo value creation
Many companies have a proven track record of successfully acquiring and integrating a target’s operations into their own, but they aren’t necessarily as adept at disentangling and maximizing divestment value.
Just as transaction analytics can help maximize the transaction proceeds from a sale, they can also minimize transition costs. These costs – which include separation costs, stranded costs, and TSA costs – are difficult to quantify and manage pre-sale. Once the revenue-generating assets have been shed, transaction analytics can help identify and quantify additional savings opportunities across various functional and shared service areas (e.g., operations, human resources, procurement, etc.).
Analytics can also be used to prioritize these savings opportunities, taking into account any resource constraints, and monitor and forecast value leakage as implementation plans are put into effect.
In addition to managing entanglement and transition costs post-divestiture, transaction analytics can also help position RemainCo for future growth:
- Pre-signing phase: transaction analytics can be leveraged in preparing and analyzing pro forma financial information for RemainCo. This enables the seller to better understand historical performance and propose corrective action ahead of the transaction close.
- Sign-to-close phase: transaction analytics can support the effective external communication of the divestment thesis and RemainCo’s financial position to shareholders, maximizing deal value by preserving and enhancing the equity valuation of RemainCo.
- Post-close phase: transaction analytics can be used to support the financial modeling and management of continued cash flow entanglements (NEB, stranded costs, TSAs, etc.).
Companies should apply the same scrutiny to their own portfolio as they would to potential acquisition targets. Advanced portfolio analytics provides sellers with an intimate and granular understanding of their business, revealing insights, potentially identifying hidden value and prompting more effective positioning.
Sellers should leverage analytics to offer buyers critical insights, so they can quickly understand the business model, performance, and long-term growth opportunities.
The use of analytics during the divestment process can attract buyers who are demanding greater access to data to support detailed bottom-up modeling, with sellers able to add significant value to the divestment negotiations by providing customer, supplier, operational, workforce, commercial and market data.