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How divestitures can fire up growth with a focus on commercial strategy

CEOs and their teams can prioritize commercial strategy when planning a carve-out or other separation to help ignite future growth.

In brief 

  • Executives planning divestitures need to focus beyond just Day 1 and make the Day 2 commercial strategy for both DivestCo and RemainCo a priority. 
  • Executives need to be aware of how the two entities may operate in new sectors with different customers, competitors and market dynamics.
  • EY-Parthenon teams have deep experience helping companies navigate the key steps required to keep the customer front and center to capture long-term growth.

Companies looking to unlock value amid economic uncertainty continue to consider divestitures, and particularly carve-outs, as a key lever. In fact, in the October 2023 EY CEO Outlook survey, more than half (58%) of US CEOs said that they are considering a carve-out, spin-off or initial public offering.

However, while the mere announcement of a divestiture often leads to an initial stock price increase, many of the businesses that they are divesting – whether they are acquired by another organization or stood up as a new company – fail to achieve their expected long-term value. One key reason: executives prioritize the mechanical separation of Day 1 and overlook the essential commercial strategy and execution needed for Day 2 and beyond.

To ignite sustained growth in both the divested business (DivestCo) and the legacy organization (RemainCo), CEOs and their teams need to make planning for Day 2 as urgent a focus as Day 1, bringing the commercial teams – sales, commercial excellence, strategy – on board as soon as the deal perimeter is defined. This is especially critical when DivestCo and, at times, RemainCo will be operating in a new commercial environment after Day 1, be it in a new sector, with new customers and competitors, or amid new market dynamics.

Start early to accelerate growth from Day 2

A strategy focused on designing successful commercial organizations in their new operating environments is what positions both entities to seize new commercial opportunities while accelerating value creation, protecting revenue, minimizing margin leakage and reducing costs.

Typically, given the different financial profiles, RemainCo may focus more on cost enhancement, while the carve-out may focus more on growth. Executives planning the commercial strategies for both DivestCo and RemainCo should look to:

  • Capitalize on the new, possibly nimbler, scale by making necessary cost structure adjustments while balancing capability requirements for future growth. This may also include reimagining the innovation pipeline. EY-Parthenon teams advised on a divestiture for a Fortune 500 multinational food manufacturing company where RemainCo laid the groundwork to progress possible strategic initiatives focused on expansion and innovation, including updating the customer mix, innovating business models, updating in-store experience and expanding accounts.
  • Design winning commercial organizations by applying sector-specific benchmarks, retaining top talent and realigning sales territories. Companies will also need to update sales and customer service key performance indicators (KPIs) based on new sector considerations while also evaluating pricing opportunities to drive margin expansion and possibly help reinvent and accelerate strategically important channels. EY-Parthenon teams also worked with the same multinational food manufacturing company to separate its salesforce in a way that set both companies up for success by balancing sales talent across RemainCo and DivestCo and carefully considering key sales KPIs and success measures for each of their new operating environments.
  • Adopt new go-to-market models that fit the strategic goals of the new business, keeping in mind the impact on the customer journey. Executives may need to evaluate sales and service motions in territories with limited or no leverage and infrastructure. DivestCo or RemainCo may operate under a transition service agreement (TSA) for a period of time, switch to a distributor model, serve customers from a different region or exit that territory altogether. Communicating these changes effectively to customers can help protect relationships and ensure business readiness and customer continuity on Day 1.

Key commercial considerations for different buyer types 

Different types of divestitures will have different needs. To unlock the full potential of a divestiture, whether it is a sale to private equity (PE) or a corporate (strategic) buyer, a joint venture (JV) or a spin-off, the new owner and RemainCo need to focus on commercial strategy early in the planning process by considering new market entry, channel expansion, pricing optimization and salesforce reorganization. Management considering a carve-out or other divestiture should also take these considerations into account in order to make an asset as attractive as possible to specific types of buyers or partners.

The PE buyer

PE buyers generally have a holding period and exit plan in mind, leading to specific commercial strategy considerations when purchasing a carve-out entity. They also typically have an extensive network, resources and technology platforms that they can share across their portfolio companies to drive digital transformation, enhance product development and innovation potential, or improve internal processes. While PEs may operate the carve-out as a stand-alone, they may have unique perspectives within the commercial functions, such as order-to-cash, application development or even digital customer service capabilities, based on their experience with other portfolio companies. 

Pre-Day 1, some collaboration between the seller and the PE buyer is needed to establish a leaner, stand-alone commercial organization for the carve-out.

The strategic buyer

Commercial strategy initiatives, such as channel, customer and product vertical expansions, are critical to achieve the deal thesis.

Buyers may need to decide whether certain areas of the commercial organization, such as marketing, sales, customer service and order-to-cash, can be immediately integrated to garner efficiencies of scale or left separate for a time to avoid customer-relationship disruptions. 

The deal thesis is likely to include the potential to grow both the current and acquired businesses through expansion into each other’s markets and establishing cross-selling operations. New product development can be boosted by combining research and development efforts; sharing intellectual properties; or aligning marketing and sales initiatives, talent and expertise.

Economies of scale can provide cost synergies and consolidation of operations to further streamline operations and eliminate redundancies by integrating the acquired business unit into the buyer’s existing structure. 

Joint ventures

Companies may participate in joint ventures to access scale, new markets or unique technology or to share risks. Considering the ownership structure and synergy implications of a JV model, both seller and buyer organizations will be focused on the long-term trajectory and success. 

The buyer likely identified certain commercial and product development needs that are more challenging or will require more time and effort. In a JV model, both companies can enjoy better sales and distribution, larger market and customer base, lower cost via economies of scale and potentially reduced competition, essentially reaping the best of both worlds.

As the seller enters into the JV agreement, it will need to evaluate the operating model of the business and level of entanglement with the rest of the organization.

The spin-off

Both DivestCo and RemainCo need to operate as stand-alone companies, though the two companies will likely share some common customers. Streamlining handoffs between DivestCo’s and RemainCo’s account teams is vital to minimize customer disruption. Key customer and supplier relationships need to be assessed, especially as some will still be served by or support both entities. 

The commercial strategy leaders at each organization need to clearly define and articulate any new business focus and strategy as they will likely operate in different sectors with new competitors, customers, value drivers, scale, market dynamics and multipliers. Talent decisions may need to be carefully thought through as employees are allocated between the two entities; talent flight is a key concern. Enhancing the sales force and aligning key sales KPIs will support their new operating environments.

Remember the customer when planning the divestiture

Focusing on Day 2 and beyond does not mean moving Day 1 planning to the background. Efficient and timely mechanical separation lays the foundation for long-term success. Commercial strategy should play a key role here as well, with a focus on three areas:

  • Minimizing commercial risk, protecting revenue and top-line growth, and limiting the impact to the customers’ experience and journey. For example, EY-Parthenon teams worked with a Fortune 500 technology company in a tax-free spin of a $15b-$20b business by devising a strategic contract separation approach powered by machine learning and artificial intelligence. The approach included customer segmentation and risk analysis, which helped the client to effectively separate contracts of more than 4,000 customers in over 100 countries. This preserved revenue and margin, protecting top-line growth for both RemainCo and DivestCo and creating minimal impact on the customers’ experience and journey.
  • Coordinating an often-complex order-to-cash process. It is critical for sales, customer service and accounts receivable teams to work together to confirm that customers are operationally ready to do business with the new legal entities.
  • Communicating effectively with key customers, including top revenue drivers or strategic priority customers. These customers require special attention as they will expect a seamless separation process with white-glove treatment, such as dedicated support for potential vendor setup requirements.


Divestitures are an ideal time for businesses to fundamentally reimagine and transform their operations. While transaction execution is a busy time for business leaders, it is imperative to incorporate commercial strategy into the divestiture plan to set up the businesses for long-term success – whether that is quickly returning value to shareholders, building out new capabilities or competing more effectively in the marketplace. EY-Parthenon teams have extensive experience in helping companies plan and craft the commercial strategy for Day 2 and beyond.


Divestitures are a tactic that many companies are using to unlock value in existing assets and fund new investments. However, many companies leave value on the table by not focusing on the customer strategy for both the divested business and the legacy organization. What steps do companies need to take to make planning for the Day 2 customer experience as important as the separation plan itself?

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