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The Virginia Engineer's Guest Articles

Yours, Mine and Ours

November, 2007

*Yours, Mine and Ours
What to disclose and what to keep private during divestiture*
by Helene Abrams

Pardon me, but your numbers are showing. And if you are a CEO preparing for a divestiture, you might be exposing too much.

Deciding what information to share and what information to keep private is one of the most critical decisions companies face when they split off divisions or product lines. Share too much information and competitors can identify advantages to use against the parent company. Keep irrelevant information and risk paying unnecessary costs, such as excess storage, maintenance, and disaster-recovery charges.

“You have to be very careful about what information you share in a divestiture,” said Mitchell Lee Marks, president of San Francisco-based JoiningForces.org and editor of Resizing the Organization: Managing Layoffs, Divestitures and Closings. “It’s a sensitive issue and a big problem, especially if the divestiture falls through.”

A growing number of boardrooms are facing the problematic question of what information to share. By September 2007, global divestitures had reached a record-setting $1.64 billion for the year in almost 10,000 deals, up 25 percent for the same period in 2006, according to Dealogic, a software developer for the investment-banking industry.

Divestiture can be a healthy strategy for pruning under-performing divisions, responding to changes in the marketplace, allowing a company to focus on different markets, or just because cash is needed for new initiatives.

Just like mergers and acquisitions, which a “Gartner Report” described as “… the norm for companies and their service providers,” divestitures should be approached as a strategic element of robust business cycles.

Some of corporate America’s most well known names are in the midst of divestitures. Nasdaq reported that Ford Motor Co. sold its Aston Martin nameplate for $925 million in March 2007 and is considering a sell-off of its Jaguar, Land Rover or Volvo units.

The Wall