CLIENT
INDUSTRY
Professional services
FEATURING
Divestiture strategy
Portfolio management
$200M+
value reinvested in other priority areas of PwC’s business as a result of the divestiture
>95%
employees retained under new ownership during the divestiture, from announcement through closing
Prioritizing the well-being of employees while building trust in the divestiture process
SITUATION
Cultivating a responsible growth mindset
Managing a business portfolio is like tending a garden. Without active, intentional cultivation, growth might happen, but not to its overall potential. As PwC considered its own business portfolio, it realized that achieving its long-term growth objectives required an active hand. PwC knew from experience advising clients that a proactive review process to help identify incompatible business units could double the chances of delivering a positive return to shareholders. With the CFO and Head of Portfolio Strategy in the lead, the organization applied a formal process for portfolio review and analysis to help inform better strategic decision-making.
For decades, the company’s approach had been to build or acquire businesses and hold them. But as PwC reevaluated its portfolio with a critical eye, it decided that increasing shareholder return meant wielding the options at its disposal — including divestitures. PwC reframed its thinking around the concept of divestitures: a proactive choice to sell an attractive asset to a buyer who could grow it, while freeing time and capital to invest in other priority areas of its business. Good business and good stewardship.
It’s about potential
During its regular, rigorous portfolio review, PwC concluded that its Public Sector division might be a candidate for a divestiture. PwC asked itself, is our firm the right owner for this business? Perhaps not: PwC’s position in the market and obligation to adhere to certain regulatory requirements were likely holding back its Public Sector business. But under a different owner, one who could invest more into the business and whose capabilities aligned more closely with its needs, the business would have a greater chance of achieving its overall potential. With those goals in mind, PwC set about finding a qualified buyer.
Though PwC considers a divestiture an option in portfolio management, it’s not the only one. The goal of the portfolio review process is to better understand the performance of each business unit and how to shepherd it to success. PwC’s process categorized its portfolio holdings and set thresholds for action, including when to invest for growth, maintain the same level of investment, restructure, wind down or divest. Based on these guidelines, the company committed to divesting only if the deal was favorable for all parties, especially the employees retained in the sale.
SOLUTION
Preparing for success
As in other divestitures, a key to executing the divestiture with positive outcomes for all was preparation. To do right by its partners, principals and employees, PwC took care to factor emotional and cultural impact into its plans alongside logistical considerations. A small executive team, including the CFO and the head of the departing Public Sector business, began consulting investment bankers about the possibility of selling. The head of the Public Sector group compiled a plan to showcase the value of the business to potential investors. At the same time, the leadership team invested heavily in resources to prepare for the sale. In addition to facilitating the divestiture itself by confirming financial readiness, completing the requisite sell-side due diligence and meticulously carving out the business from the rest of its holdings, PwC also took the time to form a plan for clearly communicating its intention to the board and its employees.
Time was of the essence. PwC needed to maintain confidentiality to make sure that employees did not hear of the divestiture prematurely from an outside party, which could severely damage internal trust. That meant the leadership team had to balance speed and quality, moving as swiftly as possible to secure a suitable buyer. PwC carefully laid the groundwork to carve out its Public Sector business before approaching its employees. Months of diligent work on a communication plan were not in vain. PwC quickly and clearly explained the opportunity to its partners, principals and employees — demonstrating how a divestiture would benefit all shareholders.
Managing change with integrity
Navigating the transition with sensitivity was crucial to maintaining the trust of employees. Once its plan was solidified and communicated, PwC addressed concerns with care. It assured its Public Sector employees that the goal was to find them a better opportunity; short of that, there would be no deal. As part of that promise, PwC dedicated itself to fostering an environment where employees felt not only secure in their jobs, but eager for the future. It committed to finding a buyer who could better invest in the future of the acquired business and offer employees a greater chance of growth.
With the employees’ buy-in and the board’s go-ahead, PwC was ready to divest. In the end, the company identified Veritas Capital as the right-fit buyer, a private equity firm with a resume of relevant experience in the public sector and a strategic vision to move the business forward. Just three months later, the deal was complete.
Success in a large-scale business transformation relies on speed and certainty. Moving quickly reduces the amount of time required to keep confidentiality — essential for maintaining trust and reducing disruption — and builds momentum toward the deal. Competitive tension drives investors to come to the table with a final bid, making sure that the deal closes without the risk of value leakage. Both speed and certainty are the result of careful preparation. The tighter the deal, the shorter the time between signing and closing, and the greater the deal’s value and shareholder return.
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RESULTS
Reinvesting for future growth
Divesting its Public Sector business provided PwC with an influx of capital to distribute among its shareholders and reinvest in other priority services and solutions. Over $200 million of the proceeds went toward incremental capital for growing the company’s Cloud and Digital and Cyber, Risk and Regulatory businesses. What is PwC most proud of? Doing right by its employees. PwC would only move forward with a deal if the outcome was fair to its partners, principals and employees. The business retained nearly all 1,500 employees in the transition, thanks to PwC’s commitment to making a mutually beneficial deal and helping people see its value.
A playbook for proper portfolio divestiture
One of the most valuable outcomes of divesting is experience. In the process of divesting its Public Sector business, PwC applied years of experience and a well-honed set of leading practices. These included the directive to continuously evaluate its portfolio, prepare resources ahead of a deal, communicate clearly with employees and shareholders, and move quickly to maintain confidentiality. From initial analysis to final closing, the company navigated the process with care and consideration for its partners, principals and employees. Executing its own divestiture left PwC with an even more refined playbook to help advise its clients and partners through the same process.
By applying its proven process for rigorous portfolio management, PwC was able to make proactive, strategic decisions toward its long-term goals, fast. Regular, detailed analysis gave the company insight into how to move forward, and a cultural mindset shift opened new possibilities for responsible growth. Thanks to agile, data-driven decision making, PwC emerged ready to grow — not necessarily bigger, but better.
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“Divestitures are not about cutting losses. They are about identifying whether a better owner exists who could prioritize and focus investments and see opportunities for synergies to increase value.”
“A successful divestiture takes careful preparation. In divesting our own Public Sector business, we knew how to manage the process properly.”
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