The results of divestments are often not up to expectations, despite their tremendous potential to create value. This article discusses how companies can increase their chances of success and shift their portfolios into higher gears.
When managers realize that a product isn’t serving strategic goals, it’s appropriate time to sell it. People who wait in awe are at risk of continual decline in performance and possibly lower purchase my sources prices.
Transparency is essential when it comes to revealing to employees about the motives and implications of the sale. This includes clearly explaining the reasons behind the decision and ensuring that employees understand that their jobs will not be affected. It is essential to communicate with the top customers within 48 hours of the announcement, and to develop a process that is specifically designed to handle any issues that arise after the closure.
A well-timed sale can allow companies to repurpose their resources and invest in strategic core areas. Neste is a Finnish oil company, changed its name in 2015 to reflect its emphasis on renewable energy. It invested the money from the sale of natural gas and oil businesses. This enabled the company to double stock returns within just five years.
The best-in-class divestors screen their portfolios for candidates on a regular basis and have teams dedicated to this work. The teams typically comprise people with specialization, such as in the separation of accounting system and the implementation of service-level agreements between the remaining company and divested business. They also conduct a thorough review of any links or entanglements that exist between the business being divested and the rest of their portfolio.
