A few months back I had written an article about the operating model as an important strategic planning tool to deliver the promised value of the deal in an integration (Link).
Although separations/divestitures follow a similar framework for op model design, there are very different considerations when planning for a separation. Also, separation planning would depend on the type of divestiture (eg: carveout, spinoff, JV etc.) and the type of buyer (strategic or financial).
At a high level, the priorities in a divestiture operational separation are 3-fold:
Untangling the given asset from the parent company
Successfully transitioning it to the buyer with a Transition Service Agreement (TSA) in place to maintain business continuity
Maximizing the value of the deal
The operating model is a great framework that provides a solid understanding of the divested business and facilitates subsequent separation planning/value creation activities. Key questions to answer are:
What is the deal perimeter (business segments, geographies, products etc.)?
What is the level of entanglement of the divested asset with the parent company? (people, process, systems etc.)?
Are there opportunities for value creation in the divested business to increase valuation?
What will be the Day 1 operating model?
What is the optimized future state (RemainCo) operating model?
In case of commingled assets:
What will be conveyed to the buyer and what will be retained by the parent company?
What capabilities will need to be in place to maintain business continuity?
What capabilities need to be stood up by the buyer?
Where will TSAs/reverse TSAs be needed?
What are the stranded costs resulting from the divestiture?
In a divestiture, the operating model provides a detailed view of the business to a buyer. It is a powerful planning tool to facilitate discussions around deal perimeter, separation planning, cost modeling, value creation, TSAs and more.
Reach out if you want to discuss your divestiture program and see how we can help.
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