FINspeak

(Q) What was the genesis for writing “Corporate Divestitures”? 

[PH] During our tenure at Thomson Reuters, there was a push to sharpen the strategic focus of the corporation’s business portfolio.  This was an organization that was perhaps best known for its information databases (such as Westlaw and Thomson Financial), but which also owned newspapers, magazines, newsletters, textbooks, a travel services business, and even North Sea oil interests at one point.  Increasingly, the strategy was to focus on electronically-delivered information solutions for professionals: to divest unaligned businesses, even if growing and profitable, and then to redeploy the proceeds into acquiring better-aligned businesses.  This strategy got the corporation some notice (it was profiled in Larry Bossidy and Ram Charan's book Confronting Reality), and equity analysts eventually began to see Thomson as more of a pure play.  This strategy was implemented throughout the entire corporation at a fairly granular level so, if one wanted to be involved in acquisitions and divestitures, Thomson was a pretty good place to be.  Back to your question - Bill and I found out through experience that there were significant differences between acquiring a business and divesting one - such as the organizational psychology, the availability of resources, the operational aspects of disentangling the business, and the factors that impact the valuation.   In our transactions, we tried to manage them in a methodical way, emphasizing in particular all the planning and preparation required before bringing the business to market.  We thought that we had learned some lessons about the do's and don'ts of divestitures and thought that a book on the topic would fill an apparent gap in the business literature.

[BG] The only thing I would add is that the gap in the literature seemed to us to be quite significant.  We found very little in the literature on the topic when we were heavily engaged in disposal activity and, when we started to discuss the possibility of writing the book, we did fairly exhaustive research on the topic that confirmed that fact.  The coverage that did exist was generally a chapter or section in a strategic planning book or a book on corporate restructuring, and much of that was dated.

(Q) Often times these types of books have an academic slant or are based on other people’s experiences, approximately how many deals were you involved with before creating this book? 

[PH] Our book seeks to look at deals from the inside – that is from the view of corporate managers who must coordinate internal resources and external advisors as well as interact with prospective buyers and their advisors.  We saw that there is actually a lot that needs to happen operationally both before and after the short window of the transaction that often does not get sufficient analysis in case studies of past deals.  Bill and I have worked together on M&A since the early 1990’s – over that time dealt with several hundred prospects and closed multiple dozens of transactions ranging from acquisition or sale of individual products to entire business units.

[BG] I would add that the mix of deals gave us insight into important differences (between acquisitions and divestitures) and variations on the divestiture process related to transaction size.  For example, we have had experience with working with boutique business brokers, generally on smaller deals, and large investment bankers on larger transactions.

(Q) What makes your book different? 

[PH]  If this makes any sense, we tried to write this book for people who don't have time to read books.  We present a step-by-step process and how-to tools dealing with pretty much every aspect of divestitures we could think of, including operational aspects that are sometimes given insufficient attention in the heat of the transaction.  It is meant to be a practice aid, so there are lots of outlines and illustrations that one could use as a starting point or to ensure that something was not overlooked.  We tried to anticipate exactly when in the process one was likely to need to know about something and presented topics within the context of the transaction flow.  We thought our best contribution would be to offer a tool that could help people save time and reduce risk.

[BG] Yes, this was not a book designed to be read from cover to cover.  We designed it with the intention of providing as many entry points as possible.  For example, in considering retention plans for key employees, someone working on a deal could go right to that section and access all of the information we consider critical.  We also included a Key Points section at the end of each chapter for those who just want to quickly scan our bottom-line thoughts for each phase of the transaction - it provides a view of the process flow, the main considerations for each step, and a cross-reference to the more detailed treatment in the chapter.

Please be sure to look for Parts II and III of the interview with Paul and Bill.