Home News & Insights Maximizing Value Through Strategic Divestitures
October 7, 2025
Maximizing Value Through Strategic Divestitures
By Wade Horst, CFA

Strategic divestitures are often misunderstood. For many owners, the idea of selling a business line raises concerns about disruption, customer reactions, and value loss. In practice, a well-planned divestiture can sharpen focus, improve capital allocation, and strengthen the remaining core business. This guide explains what divestitures are, how they create value, the primary exit paths available, and the steps to prepare and execute a separation with confidence.

When a Divestiture Makes Sense

Divestitures are most effective when a business unit no longer aligns with your core strategy or consumes disproportionate leadership time and capital. Common indicators include persistent working-capital requirements, rising maintenance capital expenditures without clear strategic benefits, customers or channels that differ from your core profile, and limited scalability within the current organization.

How Divestitures Create Value

Divestiture isn’t about shrinking – it’s about sharpening. Honeywell, Johnson & Johnson, AT&T, Verizon, eBay, Pfizer, and GE each used divestitures to simplify and refocus – exiting non-core lines, separating distinct businesses, or forming joint ventures:

  • Honeywell → Personal Protective Equipment (PPE) business sold to Protective Industrial Products, Inc. (2025): sold a non-core unit to sharpen portfolio focus.
  • Johnson & Johnson → Kenvue (2023): spun off consumer health to pursue distinct strategies and capital priorities.
  • Verizon → Verizon Media to Apollo (2021): sold media assets to refocus on core connectivity.
  • AT&T → DirecTV joint venture with TPG (2021): formed a JV to simplify the portfolio and reduce leverage.
  • eBay → PayPal (2015): spun off payments so PayPal could scale beyond eBay, while eBay focused on marketplaces.
  • GE → Synchrony Financial (2015): spun off consumer finance to streamline GE’s industrial focus.
  • Pfizer → Zoetis (2013): carved out animal health to concentrate the parent on biopharma.

By selling what no longer fits, owners can release trapped value, free up leadership bandwidth, and redirect capital toward the areas that matter most.

1) Unlock value that’s trapped

A “non-core” unit within your company can be core to someone else, often earning a higher multiple under a different owner. Monetizing that gap converts hidden value into cash today.

2) Enhance strategic focus

Every non-core distraction utilizes leadership time, capital, and attention. Exiting it reduces complexity, tightens operating cadence, and lifts the performance of what you are best at.

3) Fund growth without dilution

Use proceeds to pay down debt, invest in your core business, or buy the assets you truly need – without issuing equity. This results in a cleaner balance sheet and a faster path to value creation.

Preparing the Business for Separation

  • Develop 2–3 years of stand‑alone financial statements that clearly show revenue, profitability, cash flow, and working-capital needs, with supportable and straightforward allocation methodologies for shared costs.
  • Assemble an operating fact base: customer cohorts, pricing and contracts, backlog and renewals, supplier exposure, capacity, certifications, and key systems and data flows.
  • Map legal and regulatory requirements, including contracts that require consent or assignment, licenses, trademarks and patents, and any data privacy or cross‑border obligations.
  • Design the separation blueprint across people, systems, data, supply chain, and customer communication. Identify Day‑1 and Day‑100 milestones and resource owners.

Choosing the Right Path

Carve-Out Sale (Asset or Stock):

Sell the division or product line to a strategic or financial buyer. A carve-out sale is most effective when there are natural buyers and you can produce clean, stand‑alone financials. Benefits include cash at closing and a straightforward customer and employee narrative.

Spin-Off:

Separate the business into an independent company and distribute shares to current owners. This can be attractive when there are few obvious buyers, but the market is likely to value the unit higher on its own. Spin-offs require more set up and governance work but preserve upside potential.

Minority Sale or Joint Venture:

Sell a partial stake or partner with a firm that brings capital or capabilities while you retain meaningful ownership. This approach balances risk-sharing with continued strategic participation but requires clear governance and decision rights.

Managed Wind-Down:

When going-concern value is limited, an orderly wind‑down can allow you to complete work-in-progress, sell inventory or equipment, and close the business line cleanly. While headline proceeds may be lower, leadership can quickly refocus on the core business.

As a rule of thumb, if multiple buyers see clear strategic fit, a sale typically maximizes value. If fit is less obvious but the unit has standalone merit, a spin‑off or partnership may be preferable. If neither condition holds, a wind‑down can minimize distraction and cost.

Transition Services and Day‑1 Readiness

Transition services agreements (TSAs) can stabilize operations while the buyer completes stand‑up activities. Effective TSAs are specific, time‑limited, and priced fairly. Aim for calm operations on Day 1 and independence by Day 100. A weekly dashboard tracking TSA exit, consents, system cutovers, and customer metrics helps maintain momentum.

People and Customer Communication

Clear communication reduces uncertainty for employees and customers. Decide early who transitions and support key roles with retention incentives. Coordinate a joint message with the buyer for major customers, provide named points of contact, and set service-level expectations for the transition period.

In summary, strategic divestitures offer a practical way to simplify operations, strengthen the business, and fund future growth. With thoughtful planning and the right advisors, owners can address concerns around disruption, customers, and team stability – ultimately
navigating the process smoothly and maximizing value for all stakeholders.

Common Questions from Owners

Will this disrupt customers?
With coordinated communication, named contacts, and clear service expectations, most customers focus on continuity rather than ownership changes.

What if key employees do not transfer?
Identify critical roles early, use retention or transfer incentives, and maintain direct and timely communication.

Can we fix the business unit instead of selling it?
Sometimes. Evaluate whether the unit can be core in your strategy within a reasonable timeframe and capital plan. If not, divesting may provide a better return on effort and capital.

Asset or stock sale – what is better?
Weigh taxes, liabilities, and buyer appetite – choose the structure with better proceeds, lower risk, and stronger interest.

How do we prevent delays?
Time‑box decisions, maintain a consents tracker, and use a TSA with defined exit milestones. Weekly reviews keep the plan on schedule.

Cheat Sheet: Timeline & Milestones

Phase 0 – Decide (2–3 weeks)

  • Define the thesis: Why divest? What will you do with the proceeds?
  • Pick the perimeter: Legal entities, assets, people, IP, inventory – what’s in and out.
  • Set success metrics: Net proceeds, timing, Day-1 service stability, TSA length.

Phase 1 – Prepare (4–8 weeks)

  • Carve-out financials: 2–3 years of stand-alone P&L, balance sheet, and cash flow; allocation logic for shared costs; working capital seasonality.
  • Operating fact pack: Customers, products, pricing, backlog, renewals, supplier exposure, plant capacity, certifications.
  • Legal/IP map: Contracts that require consent or notice; licenses, trademarks, patents; data privacy obligations.
  • Separation blueprint: People move, systems cutovers, data migration, supply chain changes, Day-1/Day-100 plan.
  • Tax and structure memo: Net-of-tax proceeds under asset vs stock; cross-border considerations.

Phase 2 – Go to market (6–12 weeks)

  • Targeted outreach: Strategics first (who might benefit from synergies), then private equity or family offices with relevant platforms.
  • Secure process: Teaser → NDA → Info memo → VDR→ site visits.
  • Bid mechanics: Guide to a clean structure; define assumed vs excluded liabilities; set a working-capital peg approach.

Phase 3 – Sign & separate (6–16 weeks)

  • Confirmatory diligence: Data room hygiene; one voice on Q&A; weekly issue log.
  • Purchase agreement: Reps & warranties, indemnities, RWI (insurance) if useful.
  • Operational countdown: Customer communications, vendor novation agreements, TSA readiness, Day-1 command center.
  • Close & handover: Final working capital true-ups, TSA clock starts, weekly ops reviews until steady state.

Considering whether to divest or keep?

Let’s start a confidential conversation. Harney Capital’s senior team will take the time to understand your goals, then guide you end-to-end through the divestiture, so each step is clear, efficient, defensible, and maximizes value for the remaining core business.

Wade Horst
Wade Horst, CFA
Director

Wade is a detail-driven finance professional with experience across corporate finance, investment analysis, and hedge fund operations and compliance. In his role supporting client engagements, Wade performs comprehensive financial and accounting analyses, develops company projections and forecasts, and creates integrated financial models to support engagements. He plays a critical role in partnering with clients to leverage data across the organization to maximize the success of every engagement.