How to Structure a Divestiture Deal

Divestitures are among the most complex yet strategically valuable transactions a business can undertake. Whether selling a non-core division, subsidiary, or product line, a well-structured divestiture can unlock capital, sharpen strategic focus, and strengthen the remaining business. Poorly structured, it can destroy value, distract management, and expose both buyer and seller to unforeseen risk.

This article outlines how to structure a divestiture deal that protects value, minimises disruption, and achieves a clean separation.

Why businesses divest

Companies divest for many reasons — to focus on core operations, release capital, exit underperforming units, or realign strategic direction. A divestiture is not a sign of weakness; it’s a sign of discipline. The best corporate strategies involve both acquisitions and disposals. Divestable transactions are increasingly used to rebalance portfolios, simplify group structures, and improve shareholder returns.

The starting point: strategic clarity

Every divestiture should begin with a clear rationale. Define what is being sold, why now is the right time, and what success looks like — both for the transaction and for the retained business. A clear strategy provides direction on scope, structure, valuation, and buyer targeting. Without it, negotiations risk drifting into complexity and delay.

Management must also assess how the sale will impact customers, employees, suppliers, and the group’s future capabilities. Early planning allows time to manage these issues with care and credibility.

Deciding what to sell — and what to retain

Carve-out planning is one of the most critical and time-consuming parts of a divestiture. Identify which assets, contracts, and personnel belong to the business being sold and which remain with the parent. This includes IT systems, intellectual property, shared services, and customer relationships.

Many deals fail or lose value because separation issues are not mapped early. Building a clear “perimeter definition” — a precise description of what’s included and excluded — helps avoid disputes later and gives buyers confidence that the business can operate independently.

Choosing the right structure

The structure of a divestiture depends on the nature of the asset, the buyer’s needs, and the seller’s objectives. Common structures include:

• Share sale: The buyer acquires shares in the subsidiary or holding company that owns the target assets. This is often cleaner when the entity operates as a standalone legal company with its own balance sheet.

  
  

• Asset sale: The buyer acquires specific assets and liabilities directly from the parent company. Asset deals provide flexibility but can be complex to execute, especially when transferring contracts, employees, and licences.

  
  

• Partial sale or joint venture: In some cases, the seller retains a minority stake, enabling continued participation in future growth while sharing risk with a partner.

Each option carries different legal, tax, and accounting implications. Sellers should involve advisers early to model post-transaction effects, including potential tax liabilities, capital gains, and restructuring costs.

Valuation and financial preparation

Divested units often lack standalone financial statements, making valuation and due diligence challenging. Sellers should prepare “carve-out” financials that isolate the unit’s revenue, costs, and working capital. These records help buyers assess true performance and support a stronger valuation.

Valuation methods depend on the nature of the business. EBITDA multiples remain common, but adjustments may be needed for transitional costs, overhead allocations, and intercompany charges. Transparent disclosure of these adjustments builds buyer confidence and speeds up the process.

Separation planning and transitional services

Even with a clear perimeter, many divested units rely on shared systems and resources. Transitional Service Agreements (TSAs) bridge the gap between completion and full separation. They define how the parent will continue to provide certain services — such as IT, HR, or finance — for an agreed period after completion.

Effective TSAs are limited in duration, clearly costed, and operationally realistic. They help maintain business continuity while allowing the buyer time to establish standalone capabilities. Poorly drafted TSAs, however, can trap the seller in extended support roles and delay strategic focus.

Employee and stakeholder considerations

People are at the heart of most divestitures. Sellers must handle employee transfers with sensitivity and compliance. In the UK, TUPE regulations protect employees when ownership changes. Proper consultation, communication, and contractual clarity prevent disruption and maintain morale.

Equally, suppliers and customers need reassurance. Proactive engagement and early communication maintain trust and continuity. Clear messaging also protects brand reputation and avoids operational uncertainty during the transition.

Negotiating the sale agreement

The sale agreement (Share Purchase Agreement or Asset Purchase Agreement) defines the final terms, including consideration, warranties, indemnities, and completion adjustments. It’s critical to align legal drafting with commercial intent. Warranties should reflect the information provided to the buyer, and indemnities should cover specific risks identified during due diligence.

Completion mechanisms — such as working capital adjustments or earn-outs — should be simple, transparent, and supported by clear definitions. Complexity rarely benefits the seller and often leads to disputes after completion.

Tax and regulatory planning

Tax efficiency plays a major role in structuring divestitures. Sellers must evaluate potential capital gains, loss utilisation, VAT treatment, and group relief implications. In certain cases, pre-sale restructuring may be required to isolate the asset or create a tax-efficient vehicle for sale.

For regulated sectors, prior consent or notification to authorities may be necessary. Environmental, data protection, or competition law issues can also add layers of review that affect timing and structure.

Minimising disruption to the retained business

One of the biggest challenges in any divestiture is maintaining focus on day-to-day operations. The process consumes management time, and uncertainty can distract teams. Creating a small, empowered transaction team supported by external advisers allows the business to continue performing while the deal progresses.

The retained business should also have a clear post-divestiture plan — both operationally and financially — to reassure investors, employees, and customers.

Post-completion integration for the buyer

Although the seller’s involvement usually ends at completion, buyers often face a period of operational transition. Helping ensure a smooth handover benefits both sides, especially when TSAs are in place or ongoing relationships exist. A well-executed handover protects the seller’s reputation and reduces post-deal disputes.

Common pitfalls in divestiture deals

Even experienced companies make avoidable mistakes when divesting. Common issues include:

• Unclear asset boundaries or incomplete separation planning

• Inadequate financial data or weak standalone reporting

• Overly complex TSAs that tie up resources for too long

• Lack of early tax and regulatory planning

• Poor employee communication causing disruption or loss of talen

• Neglecting the needs of the retained business during transition

Early preparation and specialist guidance help avoid these pitfalls and deliver a smoother, cleaner transaction.

How Divestable helps

At Divestable.com, we specialise in the sale of non-core divisions, subsidiaries, and business units. Our team helps business owners and corporate groups plan, prepare, and execute divestitures that preserve value and minimise disruption. From early-stage feasibility to buyer targeting, negotiation, and separation support, we manage the process from strategy through to completion.

Next steps

If you’re considering the sale of a non-core division or subsidiary, for a confidential divestiture review. We’ll help you define scope, prepare financials, and structure a transaction that delivers a clean, value-maximising exit.