Our divestiture team can help your business to evaluate risks & rewards, ensuring that it realises the highest possible value from divestitures.

Company Divestment

As business owners, the top-level goal is usually to always strive for growth. Growth, expansion, more clients, more markets – all graphs and charts and numbers must be getting bigger and bigger, exponentially, in order for us to be comfortable with the health of our organisation.

But sometimes, the formula needs to be pared down. And at that stage in your business’s lifecycle, productivity is the driver for profitable business continuity.

How do you go about simplifying your operations, though? How do you lose the fluff and noise, and turn your business into a neat and orderly, working apparatus?

One effective method that yields positive outcomes is company divestment. Let’s define that, and look at some components of it, that will move focus from the explosive, to streamlined.

What is Divestment?

Simply put, company divestment is the process of selling specific parts of the company, to lessen the scale of a business’s inner workings, and so increase efficiency, while attempting to improve company value, overall.

The assets that are chosen to be divested, can include property and real estate, equipment owned by the business, and even financial assets like certain investments.

The reaction here is two-fold – one, to trim aspects of operations that can bog down trade with unwanted administration woes. And two, to free up revenue that can be invested into specific parts of the business to further oil the machine. These can include:

  • Debt payments
  • Freeing up capital
  • Paying dividends to shareholders

Interested in divesting? Do you want to know more? Ask us.

What are the Reasons for Divestment?

More often than not, a company will choose to divest deliberately, to lessen sluggishness caused by internal operations and or underperforming subsidiaries that may be affecting overall company health, culture and profitability. The decision does a lot to quicken processes, and frees up capital for reinvestment, or the settling of outstanding debt – all resulting in increased efficiency and an improvement of company value.

There are, however, some other reasons for divestment – and these may be uncontrollable outside factors. Some reasons for forced divestment include:

  • Reductions in investments due to social or economical influence
  • Outstanding debt concerns
  • Regulatory or legal action brought against a business

At times, and most interestingly, environmental factors dictate company divestment. Case in point: the influence of the pandemic, the rise of remote working, and the need for businesses with a lessened workforce, to reduce their overhead requirements, like large offices, or real estate that is no longer beneficial to the business.

The Different Kinds of Company Divestments

There are three different kinds of company divestments that – through their activation – could bring about positive efficiency reform for a discerning enterprise:

The equity carve-out is the selling of a company’s equity in a subsidiary business, to the public via the stock market. This is a company divestment technique that is used by companies who want to free up funds, to re-invest into certain opportunities of expansion that may arise.

This company divestment process involves the selling of assets, by a parent company. As mentioned, this could be real estate, equipment, and even an entire subsidiary business owned by the company.

This is a selling off of the shares of a subsidiary business, to shareholders, by a parent company. Something quite specific happens, though, in the wake of it – the subsidiary then becomes a standalone entity, and its shares can be traded on the stock exchange. A spin-off is common in scenarios where two distinct businesses exist within a company, and each has a different growth trajectory, and risk profile.

In an attempt to simplify and streamline, this all may seem somewhat complicated. Regent Assay is your go-to company divestment, advisor, though. These are all simply components to a chemical reaction born from the sound business alchemy we’ll create with you, to seek only benefits for your business.

Click here to ask us more about our company divestment strategy.

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