Divestitures present unique challenges that make it difficult for companies to realize full value potential. Even companies with established competency in M&A transactions can struggle to optimize value. A report from PwC’s Deals Divestiture practice identifies three primary sources of divestiture deal value. Transaction proceeds Transaction proceeds are generated from the sale of the divested business (less investment banking, legal, and advisor disbursements). These proceeds are typically the most obvious source of value that companies look to in effort to maximize deal value. Transition costs An understanding of transition costs can enhance a company’s negotiating position and serve to avoid unexpected transaction costs. There are three types of transition costs in divestiture transactions: separation costs, transition services agreement costs, and stranded costs. Separation costs are those incurred by extricating a divested business from its parent…
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