O rganizations sell assets for a variety of reasons: to achieve operational synergies, fund other initiatives, narrow their business focus, and many others. Regardless of motivation, once the parties show mutual interest and decide to negotiate, divestitures typically take a well defined
path that can be divided into two sequential activities, which we will refer to as the negotiation and transition / close phases.
During the negotiation phase, the seller and buyer begin due diligence activities, negotiate price and contract terms, determine transaction announcement and close dates, and if successful, come to agreement. This phase is typically confidential, with a limited number of seller, buyer, and third party representatives involved. Confidentiality during the negotiation phase is important to protect the interests of both seller and buyer, sometimes to preserve exclusivity, and to avoid alarming essential employees who might become concerned about job security as a result of the transaction.
If negotiations complete successfully, the transaction (including the close date) is announced to the public and activities to complete the divestiture are started. This announcement begins the transition/close phase. During this phase, all activities must be completed
During this phase, all activities must be completed in order for the transaction to close. These include activities started (but not completed) during the negotiation phase and activities that can only be started once the transaction is announced. The transition/close phase’s time-line is often compressed, typically just a few months, leaving little time to complete highly-complex transaction activities, all with the close date looming larger and larger. With so much at stake, missing this deadline is not an option.
During the transition/close phase, a significant amount of effort is placed on a transaction’s impact on the people, physical assets, and the core business of the acquiring organization. But little effort is typically placed on treating information and records as an asset … until time runs short.