Divestitures are often treated as a necessary portfolio clean-up – something to complete quickly so leadership can “get back to running the business.” But the data suggests a different reality: companies that consistently outperform tend to divest actively, and the gap between average and best-in-class sellers is significant. One portfolio-performance study of large transactions (2018–2022, >$500m) found that 90% of outperforming frequent acquirers also divest actively, and that top-quartile divestors generated remaining-company returns far above market benchmarks (reported as roughly 3x the market in that analysis).
At the same time, execution is where value is won or lost. A global divestment survey reported that 79% of companies did not meet their price expectations on their most recent divestiture – underscoring how frequently value leaks between “intent” and “outcome.”
The core lesson: a divestiture is not an endpoint. It’s a value-creation program for two businesses:
- RemainCo (the company you keep) must exit cleaner, simpler, and more investable.
- NewCo (the business you sell/spin) must be set up with a credible stand-alone operating model and value story.
Below is a five-move playbook – reframed from “how to separate” to “how to maximize value.”
Move 1: Treat portfolio pruning as a repeatable capability, not an occasional event
Leading companies don’t start divestitures with “what can we sell?” They start with “what should we own to win?” That requires an objective portfolio lens – strategy, parenting advantage, capital allocation, and investor perception.
Research from a divestiture performance study emphasizes that outperformers systematically evaluate portfolios and shed noncore/low-growth/underperforming assets to simplify and reinvest behind higher-potential areas.
Practical output: a clear divestment thesis that answers:
- Why is this business worth more under a different owner?
- What is the clean “asset perimeter” that buyers will pay for?
- What will RemainCo look like post-sale (cost base, growth focus, capital needs)?
Move 2: Engineer value through perimeter, structure, and timing – not just the sale process
Many sellers focus on running a competitive process and getting to signature. Top performers spend disproportionate time on design choices that drive valuation:
- Perimeter design: what assets, people, systems, and IP transfer – and what stays.
- Structure: carve-out vs. full sale vs. spin; each has different implications for taxes, speed, and control.
- Timing: exit timelines can trade off “optional price upside” against prolonged disruption and stranded costs.
A recurring finding in divestiture execution research is that “just splitting and selling” often leaves value on the table and can even damage the remaining business through stranded costs and prolonged distraction.
External studies also suggest that proactive divestors outperform peers – one deals-focused study reported that companies with active divestiture programs outperform by ~3.1% (relative metric in that analysis), reinforcing that portfolio moves can be a source of sustained advantage when executed with discipline.
Practical output: a perimeter/structure blueprint that optimizes:
- buyer attractiveness,
- seller stranded-cost risk, and
- speed to a clean operating steady state.
Move 3: Redefine “success” as Day 1 and beyond – because that’s where value leakage hides
A common failure pattern is declaring victory at close. But Day 1 is simply the start of an operational and financial transition that can reshape both P&Ls.
Divestiture research highlights how post-close realities – transition services, commercial agreements, and stranded costs – can materially affect RemainCo performance, which is why top performers use divestitures to reshape the economics of both entities (not just complete a transaction).
This is also where many companies miss price expectations: if NewCo’s stand-alone economics, cost base, and operating model aren’t credible, valuation suffers – consistent with survey evidence showing widespread disappointment on realized price.
Practical output: “two-P&L” design:
- NewCo pro forma (stand-alone revenue, cost-to-serve, IT/finance/HR backbone, working capital)
- RemainCo pro forma (rightsized overhead, stranded-cost elimination roadmap, reinvestment plan)
Move 4: Attack entanglements early – and use TSAs as a bridge, not a crutch
Practitioners consistently rank functional entanglement as the top inhibitor in divestitures, especially around systems, shared operations, and routes to market.
Transition Services Agreements (TSAs) can help – but only if they are designed for speedy exit. Research and practitioner guidance emphasizes that mismanaged TSAs can extend separation timelines and inflate costs; used well, they can enable smoother transitions and cleaner separations.
A recurring risk is “TSA drift”: the transition period becomes the default operating model, while both parties lose urgency. Specialist carve-out guidance recommends explicit TSA inventories with costs and exit dates, governance, and a visible “burn-down” plan to prevent this.
Practical output: an entanglement heatmap + TSA strategy:
- identify top 10 separation blockers (IT, data, manufacturing/shared assets, customer contracts, procurement)
- decide what must be disentangled pre-close vs post-close
- define TSA SLAs, pricing, escalation, and – critically – exit milestones
Move 5: Protect the base business with ruthless focus and dedicated talent
One of the largest hidden costs of divestitures is not advisory fees – it’s lost momentum. Execution teams unintentionally pull attention from customers, pricing, operations, and talent retention.
Divestiture performance research stresses that distraction can harm both NewCo and RemainCo and destroy more value than the separation creates – hence the recommendation to keep the vast majority of the organization focused on business-as-usual while a small, highly dedicated team runs the divestiture program.
Practical output: a separation operating model that includes:
- a small, empowered separation “core team”
- clear decision rights and escalation
- base-business KPIs monitored weekly to detect “separation drag” early
A board-ready checklist
- Do we have a clear separation thesis – and a value story for both NewCo and RemainCo?
- Have we optimized perimeter, structure, and timing, not just run a sale process?
- Are pro formas explicit – and do they include stranded costs and dis-synergies?
- What are the top entanglements, and what’s the plan to eliminate them?
- Are TSAs designed with governance, SLAs, and an exit plan (not “set and forget”)?
- How are we ensuring the base business stays healthy throughout the process?
