Divestitures

From portfolio assessment, to discovering value in carving out separate entities, we work with you to identify value maximizing opportunities. We bring an objective and unbiased approach aimed at increasing speed to market and improving impact on cash flows and ultimately deal value. Our teams deliver straightforward advice and execution support to help you make the right portfolio decisions to secure your future.

Every carve-out is unique. The optimal tax structure can help you navigate compliance complexities and the potential for value leakage. Understanding the corporate strategy and the underlying legal and regulatory requirements is critical to designing and implementing a legally viable and tax efficient transaction.

Assessing the most tax-efficient structure – one that disentangles commingled business tax-efficiently, minimizes transaction related taxes, preserves and/or monetizes tax attributes and can be executed within the timeframe of the transaction closing.

Assessing and analyzing the divestiture from a buyer’s point of view to identify possible issues, risks and opportunities that may impact deal value should be done before buyers begin their own diligence activities. Business diligence takes a close look at the specific details of the business including the quality of earnings, stand-alone costs analysis and other operational details.

In addition, business diligence will include detailed analysis of areas typically subject to purchase price adjustments — such as cash, working capital and indebtedness to Seller’s establishment of targets. This process identifies risks and opportunities and develops the right messages and supporting documentation to help preserve and maximize the value of the deal. Throughout this process, we’ll work with you to review the purchase agreement and strategies for crafting purchase price mechanisms in order to help preserve the deal value through and post closing. Divestiture modeling can also help you have a dynamic deal model that can evaluate various scenarios and iterate the assumptions throughout the process.

Preparing auditable carve-out information of the business being divested is oftentimes one of the most complex and lengthy workstreams in a deal. Carve-out financial statements are usually required for regulatory purposes and/or financing, and stakeholders will often want to bridge this information to the deal financials. Creating a single data platform to help ensure all stakeholders base key business decisions on the same data, maintaining optionality and having credentialed project managers is critical when preparing carve-out financial statements. Carving out entangled businesses from disaggregated data sources adds to the complexity — PwC has proprietary technology to automate this process and help reduce execution risk.

Divestitures impact a broad range of enterprise functions with many interdependencies that can create complexity. That’s why, at PwC, you’ll work with specialists who understand the moves for your business — from data to industry experience, analysis to value capture, and strategy to execution. We’ll work with you to develop your divestiture blueprint so that value creation is a focus along the way. We don’t think there’s a one-size-fits-all solution when it comes to divestitures. Instead, we adapt our tools and processes to custom fit your culture, people and strategic environment.

Key components include:

• Divestiture Management Office (DMO): Coordinating enterprise-wide divestiture efforts, managing dependencies and resolving issues to support the deal team and executive management with prioritizing activities and balancing resources across competing initiatives.
• Communication and change management: Communicating transaction value proposition to employees (keeping them engaged and addressing concerns), customers (affirming continuity and no disruption to services) and other key constituencies by developing and executing on a robust change and communication plan.
• Transition operating model design: Modeling how the seller and divested business will operate immediately following the transaction close. This involves designing how people, processes and systems will support the sold/spun business during the TSA period while helping minimize the disruption to the seller/spinee.
• Stranded and separation costs: Assessing stand-alone, one-time and stranded costs, providing scenarios that increase the value of the carve-out business and also reducing transaction and restructuring costs.
• Contract separation: Separating contracts is often a long-lead time area. Planning ahead can help you bring the right parties to the table to help ensure a successful transition while minimizing potential revenue and cost impacts.
• Day One readiness and functional separation: Providing functional expertise to developing detailed plans to implementing separation strategy and enabling enterprise-wide tactical execution of transition requirements.
• Legal entity separation: Assisting with this long lead-time item to create a separate legal entity structure in order to enable stock sale or spin. This is highly integrated with the overall functional separation strategy but leverages tax and legal steps as starting points.
• Transition Service Agreements (TSAs): Identifying transition services required by either the seller or carve-out business after close. Understanding requirements, terms, costs, and plans for delivery under different exit scenarios.
• Parent optimization: Evaluating the impact of the divestiture on the seller’s remaining businesses and competitive capabilities.

Employees constitute one of the largest operating expenses of a company. The HR function plays a pivotal role in helping to drive the transformation that comes from confidently divesting the right assets at the right time in order to secure value. The ability for HR to accelerate closing, manage costs and secure employee retention hinges on close collaboration with the finance, tax, legal, IT and corporate development departments. It is imperative to drive employee processes and articulate human capital strategies in operational, financial and legal terms.

IT is the most complex area for many divestitures and its success is critical to getting the deal done. IT enables the business and functions end-to-end across the value chain of most organizations. At PwC we have built a world-class global team of IT divestiture professionals who have created the strategy and executed some of the largest and most complex divestitures. Our teams have both industry and IT domain expertise in applications, infrastructure, org/op model, cyber, cloud, and much more. They focus not only on closing the deal with minimal business disruption, but also enhancing value for both the Seller and the Buyer. We have pre-defined future state IT architectures which help enable cost-reduction, minimize one-time cost, expedite transaction close, reduce TSA’s, and enhance deal value.