Valuing a Non-Core Division

When a business decides to sell a non-core division, it’s often part of a wider strategic move — refocusing on core operations, raising capital, or streamlining the business.

But valuing a division is not as straightforward as valuing an entire standalone company. Non-core segments are often intertwined with the parent business, making it more challenging to determine their true market worth.

At Divestable.com, we specialise in helping corporate owners and investors divest non-core assets in a way that maximises value and ensures a smooth transition. Here’s how to approach the valuation process.

Define the Scope of the Division

The first step is to clearly define what’s being sold. This means:

• Identifying which products, services, or operations are included

• Mapping the assets and liabilities that belong to the division

• Determining which employees, contracts, and intellectual property will transfer to the buyer

Clarity at this stage avoids disputes and ensures the valuation is based on the correct scope.

Separate the Financials

In many cases, the division’s accounts are part of the wider group’s financial reporting. To value it accurately, you need a carve-out — separating revenues, costs, and assets specific to that unit. This can include:

• Allocating shared costs proportionately (e.g., marketing, administration)

• Removing intercompany transactions that won’t continue after the sale

• Adjusting for one-off or non-recurring items

The goal is to create a standalone profit and loss statement that a buyer can trust.

Identify Earnings Potential

Most buyers will value the division based on an adjusted EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) multiple. The “adjusted” part is critical, as it removes:

• Non-recurring costs or revenues

• Parent company overheads that won’t be carried over

• Unusual or extraordinary items

For example, if a shared HR department costs £300,000 but the division will only need £100,000 worth of HR post-sale, this adjustment increases the division’s apparent profitability — and therefore its value.

Assess Strategic Value

In many divestitures, the strategic value to a buyer can be more important than the raw financials. A buyer might pay a premium if the division:

• Gives them immediate access to a new market

• Strengthens their supply chain

• Adds specialist skills, products, or technology they can’t easily replicate

Understanding potential buyers’ motivations is key to maximising valuation.

Consider Asset-Based Valuation

If the division isn’t consistently profitable or is being sold for its assets rather than its earnings, an asset-based approach may be more appropriate. This involves valuing tangible and intangible assets separately, such as:

• Property, plant, and equipment

• Inventory

• Patents, trademarks, and software

• Customer lists and contracts

Factor in Transition Arrangements

Many buyers will require transitional support from the parent business — such as IT systems access, shared premises, or back-office services — during the handover period. The cost and complexity of these arrangements can influence value, so they should be factored into negotiations.

Why Expert Support Matters

Valuing a non-core division is part financial analysis, part strategic insight. At Divestable.com, we:

• Help define the division’s scope clearly

• Produce accurate carve-out financials

• Identify and approach the right buyers for maximum value

• Structure deals that make the transition smooth for both sides

Considering a divestiture?

Contact Divestable.com for a confidential review of your non-core asset and valuation options.