Background

• A $300 million manufacturing client decided to divest a $20 million division that was not aligned with the strategic objectives of the company, despite the division's steady financial performance.

Problems

• The division management team felt it was being abandoned by the parent company and worried about the future of the team after a sale.
  
  
• The parent company was concerned about the division's performance during the sale process and the behavior of the division management team during presentations, recognizing that these issues could severely impact sale price.

Resolutions

• The client needed to reassure division management. To accomplish this goal, senior managers were each given an employment contract that guaranteed severance in the event of termination. The client insisted in the sale contract that a buyer assume the employment contracts.
  
  
• To incentivize division management, the client established a special bonus pool to be distributed if the business plan was met during the divestiture process.
  
  
• The client reviewed the sale process in detail with the division management team and explained that as a public company the client needed to get a fair price for the division. While division management could not choose its new owner, the client would take into account how management would be treated post-acquisition.
  
  
• The division was sold to a financial buyer that paid a fair price to the client and gave equity to the division management team, all of whom were retained.
  
  
• Anticipating issues and addressing them up front before they became problems allowed the divestiture to reach a successful conclusion and meet the objectives of all parties.