Essential Insights into Mergers, Acquisitions, and Divestitures

Most organisations aren’t equipped with in-house specialists to handle mergers or divestitures. Companies rarely perform these activities often enough to develop internal expertise. As a result, it’s crucial to engage external consultants early in the process. 

“There aren’t people with the job title ‘divestiture expert’,” Richard explains. “Experts typically come from fields like finance, technology, or business but have accumulated divestiture experience through hands-on involvement.” 

The earlier you bring in specialists, the better. These professionals can help identify potential risks, bridge gaps, and offer frameworks based on previous experiences. 

Not all divestitures are equally complex. Some can be relatively straightforward—such as spinning off a self-contained business unit—while others are far broader and more intricate. The latter can involve multinational corporations spread across several regulatory environments. 

“In some cases, you’re almost building an entirely new business, replicating core functions like HR, finance, or logistics from scratch,” Richard notes. 

The complexity depends on the type of business being separated and the integration levels between existing systems and processes. It’s essential to have a clear understanding of the complexity early in the process. 

Time is of the essence. Many organisations underestimate how much preparation is required, which can lead to rushed decisions and increased costs. 

The discovery phase is vital, involving the identification of key systems, processes, and assets that will be affected by the merger or divestiture. The earlier this is done, the fewer surprises will emerge down the road. 

“Discovery helps avoid the classic pitfall of ‘not knowing what you don’t know’,” Richard warns. 

Divestitures provide a prime opportunity for internal politics to come into play. Departments may use the process to offload outdated technologies or unwanted responsibilities onto the other organisation involved in the split. 

“For example, a CIO might try to offload old tech to the other company while keeping the newer systems,” Richard suggests. 

On the technology side, successful projects often depend on clear system ownership and seamless transitions. Temporary service agreements (TSAs) are sometimes used to ensure operations continue smoothly while systems are disentangled and migrated. 

Divestitures don’t only affect systems and processes—they also impact people. Employees often feel uncertain about their roles during these transitions, which can lead to disengagement or even resignation. 

“Without clear communication, critical employees might leave, or others may do the bare minimum. It’s essential to keep them informed and reassured,” Richard emphasises. 

When outside consultants are brought in, it’s crucial to ensure existing staff don’t feel threatened by their presence. Creating a collaborative atmosphere where everyone feels secure and valued helps smooth the transition. 

Richard identified three primary pitfalls that organisations should be aware of: 

1. Starting Too Late: Delays in starting the project can create a rushed environment and increase costs. 

1. Lack of a Clear Future-State Vision: Without a clear idea of what the new organisation(s) will look like, decisions become reactive rather than strategic. 

1. Insufficient Discovery: Not having enough information at the outset leads to unforeseen complications. “You can never do enough discovery,” Richard advises. 

Ultimately, mergers and divestitures are about managing people, processes, politics, and technology. These projects require careful planning, transparency, and the right expertise to succeed. By focusing on early engagement, thorough discovery, and managing the human side effectively, businesses can avoid costly pitfalls and achieve their strategic goals. 

If your organisation is considering a merger or divestiture, preparation and expertise will make the difference between a smooth transition and a costly scramble. As Richard puts it, “You need the right people in play, clear definitions, and as much discovery as possible to mitigate the inevitable unknowns.” 

This conversation provides a broad overview of what it takes to manage complex business transformations.  

Stay tuned for future insights, where we’ll explore specialised areas of mergers and divestitures, including detailed case studies and advanced best practices.