Secrets to Successful Divestiture

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It’s common for large corporations to divest, but there are many reasons for even small businesses to sell, close or otherwise dispose of assets or operations.

Divestiture also can be highly useful for small businesses that are growing too quickly, allowing owners to downsize temporarily in order to better manage that growth. Our advisors are positioned to partner with you to consider the best options for managing your company.

Common reasons to divest

  • Raise cash by selling property, equipment, a patent or license to manage or improve cash flow.
  • Sell or spin off a subsidiary if it is not a good fit for the overall operation.
  • Sell an underperforming asset such as a product or service line.
  • Close one or more locations that are not performing.
  • License equipment or intellectual property.
  • Bankruptcy, either Chapter 7 in which all assets are liquidated and sold, or Chapter 11 in which some assets are liquidated while the remaining areas of the business are reorganized.
  • Closing and sale of the entire business for retirement or other reasons.

How to Prepare

Business Value

  • The value of a business generally is a multiple of its profit, depending on overall size of the operation. It’s best to obtain a third party valuation to establish a firm, credible basis for a sale price.

Financials

  • Work with your accountant to ensure your financials are as transparent as possible.

    Review statements and tax returns for the past three to five years; prepare an inventory of equipment, products and any intellectual property or other intangibles that would be included with a sale, and provide a profit and loss statement for potential buyers.

Plan Ahead

  • Track your business operations closely so you can spot potential problems before they become serious and force you into a sale or closing before you are ready.

    Don’t wait until you are ready to retire to think about selling. It can take months or years to divest even a thriving operation. Some companies are not prepared for unexpected external factors such as a recession or new competition and therefore are unable to sell.

Sales

  • Now is the time to increase sales to attract interest. Potential buyers will want to see healthy revenue, steady growth and multiple customers or contracts in the pipeline.

Build Your Team

  • Work with professionals to ensure you have the expertise and advice you need to get the best price and outcome for your business.

    You’ll need an attorney, accountant, insurance advisor, financial advisor and potentially a business broker to identify and vet potential buyers.

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Your Trusted Advisor

The decision to divest all or part of your business is perhaps the most difficult one you will make as an owner. It affects not only you and your family, but your employees and their families, as well as your customers and suppliers. Our advisors have the expertise to analyze your business and will offer you options to determine the best course of action for you and your company, ultimately resulting in your financial well-being.

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