A divestiture is the sale of a business unit by a parent that continues operating, which makes it an ordinary sale with four extra questions attached. All four exist because the thing being sold was never a standalone business, and all four are cheaper to answer before going to market than during exclusivity. This page sets out the four and what each costs when it is left to the buyer's diligence.
What are the numbers, given the unit never reported any?
Carve-out financials are constructed: allocations of shared cost, standalone estimates and adjustments both sides will argue about. Constructing them before going to market means arguing about method once; constructing them under exclusivity means arguing about method and price at the same time.
What does the parent provide that has to keep flowing?
Payroll, IT, accounting, benefits, insurance and often the customer contracts. Everything is transferring, being replaced or being rented back, and the rented-back list is the transition services agreement: $381,024 across twelve months on this site's worked example, of which $28,224 is the markup.
Who goes, and what about the people both sides need?
Shared people are the hardest category because both sides genuinely need them. A divestiture that reaches signing without resolving them ships an unresolved argument into the first month of the TSA, where it costs more and is harder to settle.
What does the parent look like afterwards?
The stranded cost the parent carries once the unit leaves, and whether it can be removed. This is the question the seller answers for itself rather than for the buyer, and it is the one most likely to make a board decide the divestiture is not worth doing after all.
Questions people ask about divestiture process
What is a divestiture?
The sale of a business unit by a parent that keeps operating. It is a carve out from the seller's point of view.
What is the largest extra piece of work?
Constructing financials for a unit that never reported any, and cataloguing what the parent provides so the TSA can be priced.
What does the parent have to consider for itself?
Stranded cost after the unit leaves, and whether it can be removed. It is the question most likely to stop a divestiture.