The Corporate Divestiture
The possible divestiture of a corporate subsidiary or division warrants separate consideration than the sale of a company. The operations may not fit into the core competency of the parent company or perhaps the parent company just needs the cash that would be generated by the sale of the division. Whatever the reason, the sale of a division to either an investment firm or corporation could provide great opportunities for the parent company, the subsidiary, the CEO or General Manager of the subsidiary and the buyer.
Larger corporations generally turn to their major investment banks for advice about and implementation of divestitures. Often, however, the operations to be divested are too small for a major investment bank to handle effectively. For example, the buyer pool between small and large mid market companies can be quite different. Under those circumstances and in the case of a mid-market company, a well-connected mid-market M&A firm such as Plexus can implement the divestiture strategy cleanly and confidentially.
Plexus believes that Private Investment Firms are particularly suited to buy orphan subsidiaries that have strong capable management. A purchase by an Investment Firm (sometimes referred to as financial buyers) provides a winning solution to all parties. In particular:
- The parent company receives full value for the division;
- The division’s management would be able to acquire a significant equity position in the ongoing company.
- The Private Investment Firm would acquire the division or subsidiary in partnership with local management, with the intent of operating the company under the stewardship of present management;
- Create a strong partner that understands your needs as a supplier, sub contractor, etc…;
- Strategic alliances can be formed;
- Maintain goodwill in the community and divested operations;
The Plexus Process
Sometimes a large parent company would like to divest an orphan operation, but does not wish to devote any significant time to developing and implementing the process. The parent would, nevertheless, entertain a reasonable offer for an operating. Under those circumstances the division president or GM may be authorized to locate a buyer. We believe that Plexus can be an invaluable asset to the division president (as well as the parent company) to assist him in implementing a divestiture. Here are some key elements about our process:
- Because of our continuing dialogue with Private Investment Firms our search for a financial buyer would be relatively quick and yield only very experienced and qualified firms so as to ensure a rapid and smooth closing.
- Any interested firm would be pre-screened by the division president or parent company before any identifying information is released.
- We would expect an acquiring Private Investment Firm to make an all cash offer and arrange equity participation for current management, the company’s continuing and future stewards.
- If desired, our fees can be paid by the winning acquisition firm.
One Source M&A Contact Plan
Please contact us if for more information.