Divestitures and Carveouts - Keys for a Successful Transition

As organizations are looking for opportunities to become more efficient and profitable, divestitures and carveouts will become more prevalent in the market.? We are predicting an increase in these types of transactions over the next 12 to 18 months.? Many leaders claim that these deals are just reverse integrations but that is not the case.? These transactions are complex and have a potential to blow up if they are not handled correctly.??

We recommend that M&A teams think about the end game first and build a plan to separate a business unit or profit center from the parent company.? The biggest question to be answered is “What will the carved-out company look like post close?” . Will they be stand alone and need all the G&A functions or will the acquiring entity have all the needed support systems for the company to operate?? Once you have these answers, the teams can build a resource plan and a separation plan for a successful separation. ? There are many other challenges with a transaction like this and it will take longer than any plan you build.??

Work with a team or third party that has done this before and understands the complexities of a divestiture and also knows the right questions to ask to address any possible problem.? Legal entities, HRIS and payroll tools, international contracts and contractors are some of the biggest issues that need to be proactively addressed.? Communications will also be a challenge that will take a good amount of time for a team.??

These types of transactions are going to increase and HR Teams should prepare for these challenges as early as possible working with an experienced partner for a successful deal.

Rey Ramirez is co-founder at Thrive HR Consulting, a minority-owned HR advisory that provides value-based HR support for mergers and acquisitions, C-Suite executive coaching, employee relations, DEI and belonging, performance management, employee engagement, and talent acquisition.