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Divestitures are when a company sells off an asset they previously owned. The most common divestiture involves selling shares of a company for example through a reverse stock split. The main goal of a reverse split is to bolster shareholder value by increasing liquidity and creating more buying opportunities. A reverse split is when a company buys back shares of its own stock, usually to reduce the number of shares outstanding. This will result in more shares being held by existing shareholders. It can also result in an overall reduction in the price per share, since the pool of investors who are able to buy your stock is reduced.


Why do businesses embark on divestitures?

There are generally three reasons for selling off divisions or parts of a business through divestitures:
All three reasons will help improve shareholder value, but each reason does so in different ways.

  1. The above scenario is an example of a divestiture made to reduce the diversification risk. The main reason for this being the focus is due to how it positively affects shareholder value. When a company has more than one asset, shareholder value can be hurt by losses in one business affecting another. One way to guard against this is by selling off parts of your business and thereby reducing your overall risk and exposure to one specific industry or market segment. A good example of this type of divestiture would be spinning off an unprofitable branch into its own company that investors can invest in on its own merits as a separate entity, apart from the parent company.
  2. The above scenario is also an example of a divestiture made to increase the value of the business and therefore the value of shareholders’ investment. This can be done by discontinuing a successful line of products and/or services, or by discontinuing unprofitable lines. One way to decrease risk is also something that will increase shareholder value, which is selling off unprofitable assets such as factories and lines of business such as divisions that are losing money annually. This can be done with a merger or acquisition (M&A) to increase market share or exit opportunities through liquidation.
  3. A divestiture may also be made simply to raise capital for investment into another industry (or company). This can be done through either a secondary offering of common shares or new issuance of debt securities. This is one of the most common reasons for business divestitures, and can be done to raise capital for many different reasons.

Each situation above will improve shareholder value in some way and therefore create positive ROI (return on investment). Further, these measures can be combined with each other to create significant shareholder value that benefits current and future shareholders. As of January 2010, the U.S National Center for Policy Analysis reported that companies sold off assets to improve shareholder value worth over $200 billion each year. Therefore, by selling assets the company will be able decrease risk while also increasing shareholder value through diversification and reinvestment into other industries or companies.

How do businesses determine when to embark on divestitures?

The Pabrai method is a favored method used to determine a mix of asset classes that will maximize a portfolio’s productivity. Its formula includes ownership in both domestic and international companies.

In general, diversification has been shown to be beneficial. However, the exact level of diversification desired for an investor depends on his or her investment horizon, risk tolerance, and time frame. The optimal amount of exposure needed by any one investor will vary from person to person based on his or her personal preferences and goals and can be determined by a professional.

There is also a broader concept of diversification that is related to investment and portfolio management: portfolio diversification. It is the diversification of one asset class over multiple asset classes with the objective of reducing risk and improving return. A professional analyst could easily determine the best course of action for a business by examining key fundamentals of the business.

Hire related Fintalents

Hire the best Divestitures specialists in 2,900+ industries

Fintalent is the invite-only community for top-tier M&A consultants and Strategy talent. Hire global Divestitures consultants with extensive experience in over 2,900 industries. Our platform allows you to build your team of independent Divestitures specialists in 48 hours. Welcome to the future of Mergers & Acquisitions!

Why should you hire Divestitures experts with Fintalent?

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Every Fintalent is exclusively invited and vetted.

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Hire efficiently. Your M&A team is ready in 2 days or less.​​​​

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Fintalents are best-in-class - and specialized in 2,900+ industries.​

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Frequently asked questions

Most frequent questions and answers

What clients usually engage your Divestitures Consultants?

We work with clients from all over the world. Our clients range from enterprise and corporate clients to companies that are backed by Private Equity or Venture Capital funds. Furthermore, we work directly with Family Offices, Private Equity firms, and Asset Managers. Most of our enterprise clients have dedicated Corporate Development, M&A, and Strategy divisions which are utilizing our pool of Divestitures talent to add on-demand and flexible resources, expertise, or staff to their in-house team.

How is Fintalent different?

Fintalent is not a staffing agency. We are a community of best-in-class Divestitures professionals, highly specialized within their domains. We have streamlined the process of engaging the best Divestitures talent and are able to provide clients with Divestitures professionals within 48 hours of first engaging them. We believe that our platform provides more value for Corporates, Ventures, Private Equity and Venture Capital firms, and Family Offices.

Our Hiring Process – What do ‘Community-Approach’ and ‘Invite-to-Apply’ mean?

‘Invite-to-Apply’ is the process by which we shortlist candidates for the majority of projects on our platform. Often, due to the confidential nature of our clients’ projects, we do not release projects to our whole platform but using the matching technology and expertise of our internal team we select candidates who are the best fit for our clients’ needs. This approach also ensures engagement with our community of professionals on the Fintalent platform, and is a benefit both to our clients and independent professionals, as our freelancers have direct access to the roles best suited to their skills and are more likely to take an interest in a project if they have been sought out directly. In addition, if a member of our community is unavailable for a project but knows someone whose skill set perfectly fits the brief, they are able to invite them to apply for the role, utilizing the personal networks of each talent on our platform.

Which skills and expertise do your Fintalents have?

The Fintalents are hand-picked and vetted Divestitures professionals, speak over 55 languages, and have professional experience in all geographical markets. Our Divestitures consultants’ experience ranges from 3+ years as analysts at top investment banks and Strategy consultancies, to later career C-level executives. The average working experience is 6.9 years and 80% of all Fintalents range from 3-12 years into their careers.

Our Divestitures consultants have experience in leading firms as well as interfacing with clients and wider corporate structures and management. What makes our Divestitures talent pool stand out is the fact that they have technical backgrounds in over 2,900 industries.

How does the screening and onboarding of your Divestitures talent work?

Fintalent.io is an invite-only platform and we believe in the power of referrals and a closed-loop community. Members of our community are able to invite a small number of professionals onto the platform. In addition, our team actively scouts for the best talent who have experience in investment banking or have worked at a global top management consultancy. All of our community-referred talent and scouted talent are subject to a rigorous screening process. As such, over the last 18 months totaling more than 750 hours of onboarding calls, of which only 40% have received an invite-link after the call.

What happens if I am not satisfied with my Divestitures consultant’s work?

During your initial engagement with a member of our Fintalent talent pool with no risk. If you are not satisfied with the quality of your hire for any reason then we are able to find a replacement at short notice. There is no minimum commitment per project, but generally projects last at least 5 days and can last 12+ months.

Interested in our invite-only community of tier-1 Divestitures experts?

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