Keys to Successful Divestitures

There’s no doubt about it. A well-crafted TSA (Transition Services Agreement) can make or break a divestiture. In a recent review, Deloitte describes some of the key elements of making a fast break. Shrinking the interval between Day 1 (Financial Close) and Day 2 (Full Separation) is a priority goal of a successful transition. To achieve a short timeline, it’s crucial that IT decisions be made as soon as possible, even before Day Zero (the day the deal is publically announced).

While the Deloitte approach provides a reasonable framework, I think we can add some additional perspective based on our own experience in this area.

1. The acquiring company or PE firm should recognize the fact that the IT resources within the business unit to be carved out are not likely to possess the strategic vision and leadership to create a target architecture and craft an accelerated transition plan.

2. The internal transition team needs skilled coaching and leadership to effectively “turn the tables” on the former parent organization. Think  about it: the IT resources you are bringing over with the divestiture have been taking orders from corporate IT. During the transition they must quickly change the dynamic of power and manage their former bosses as service providers.

3. SLAs are important. The Deloitte article minimizes the need for formal SLAs, but it only stands to reason that service requests from divested assets will fall to the bottom of the priority list when there are more pressing internal service requests.

4. Make sure that the agreement specifies the level of involvement from the parent organization’s resources and access to data and information that you can expect during the transition.

5. Don’t pay for what you don’t need, and scrutinize TSA cost drivers diligently. For example, if the parent organization is making an allocation to maintain a highly customized, automated environment that you will not fully use during the transition period, you should negotiate for discounted fees for that particular TSA area.

6. Manage expectations within the carved out business appropriately. Sometimes a little more chaos and pain in the short term is worth it to achieve full separation and transition to a more efficient operating platform.

Experience, negotiation, coaching, strategic vision are all key elements of a successful transition team leader. If you can’t find the right combination of skills within the acquired asset, it’s well worth it to bring in an expert to lead the team during the short but intense transition team.

2 thoughts on “Keys to Successful Divestitures

  1. Pingback: Carving out a new company, aka “Just Add Water” « Edgewater Technology Weblog

  2. Excellent post. I used to be checking continuously this blog and I’m inspired! Very helpful information specifically the closing part 🙂 I deal with such info much. I was looking for this certain information for a long time. Thank you and good luck.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s