Businesses built on years of acquisitions, complex operating models or shared service centers are often intertwined across many functional levels. And fifty percent of companies say failure to present the business as stand-alone “scared off” potential buyers, eroding value on their last divestment. Sellers need to articulate a clear plan to achieve a stand-alone operating model and communicate a day one transitional operating model. Thus, time can be well spent disentangling the business for sale before the formal process.
Divestitures can create tax value as the stand-alone operating model of a business is restructured to better match the post-sale commercial strategy and synergies. The key is to think of the divested business as a business in its own right which means for that business:
- What is the most efficient operating model
- Where should its people be based
- What capital structure should it have
Understanding the tax profile is a key consideration in this process.
Where the deal team has operations and tax working together, tax implications of separation (e.g., intercompany loans, historic transfers of assets) and their impacts on tax can flow seamlessly into wider workstreams. Understanding this is critical to avoiding surprises and managing messaging to wider teams.
For a divested business to continue operating without significant business interruption, companies are frequently using delayed close mechanisms — a period where the legal ownership remains with the seller, but the net economic benefit is with the purchaser. Tax can often bear the brunt of risks in such situations with complexity and interdependency from direct taxes, indirect taxes and increasingly, tariffs. Close operational workstream alignment, including tax, can help manage the additional risks this arrangement can create.