A divestiture is the partial or full disposal of a business through sale, exchange, closure, or bankruptcy. In essence, and most often, a divestiture is the sale of a business and the mainstay of Pacific Mergers and Acquisitions’ business and our core competency.
Divestitures can take the form of “going concern” businesses or businesses “not as a going concern”. Such divestitures can also be segmented into what we call “Main Street” and “M&A” deals. In Main Street deals, the acquiring party is often an individual, partners, or family members, and the acquisition is usually non-strategic, non-synergistic, non-industry, or non-financial in nature. M&A tends to be more focused in the lower middle market where the acquiring party is a strategic, synergistic, financial, or an industry buyer, and where the acquisition often will result in being a “Subsidiary”, or an “Add-On”, or a “Platform” company.
These divestitures can be structured as:
- “Direct Sale” or “Negotiated Sale” (Most often and most practical in Main Street divestitures where confidentiality is mostly assured).
- “Closed Auction” (This is often used in troubled or non-going concern businesses and often are structured as asset sales).
- “Broad Auction” (Used primarily in lower middle market and larger divestitures. This process offers the best chance of maximizing value for such size businesses, but usually takes the longest time to get through and complete, and due to the nature of the process, risks of confidentiality breaches are higher).
- “Controlled” or “Managed Auctions” (Again, typically for larger M&A transactions and where the seller can maintain a lower risk of confidentiality breach and where such managed auction processes can often drive higher valuation).
If you are thinking of divesting now or in the future, a free consultation with a professional at Pacific will go a long way in realistically or practically preparing you for a successful Divestiture.