What the process is for
A divestiture process exists to do one thing: find the buyer who values the asset most, and get them to say so in competition with others who also want it. Everything else, the preparation, the documents, the timetable, is in service of that.
Sellers who lose sight of this end up optimising the wrong things. A beautiful information memorandum sent to three friendly acquirers produces a worse outcome than a plain one sent to twenty credible bidders on a fixed timetable. Competition sets the price. The materials only determine whether bidders can underwrite what they are looking at.
Phase one, deciding whether to run at all
Before an adviser is appointed, the board needs settled answers to three questions.
Why now. Portfolio focus, capital needs, a regulatory requirement and a response to a deteriorating market are four different reasons, and they imply different timetables and different acceptable outcomes. A seller divesting because the division no longer fits can afford to wait for the right buyer. A seller divesting because they need the capital cannot, and should know that before the process starts, because buyers can tell.
What exactly is being sold. Products, customer contracts, engineers, intellectual property, domains, data, and the shared services the division consumes. This is a decision rather than an analysis, and leaving it open is the single most common cause of a price re-trade later.
What the walk-away number is. Agree it before bids arrive, not after. A process that reaches a good offer and then discovers the board wanted thirty percent more ends badly and publicly, and the market remembers an asset that was shopped and pulled.
Phase two, preparation
Eight to twelve weeks for a division that has never been separated. This is the phase that decides the outcome and the one sellers most often try to compress.
The work is a standalone financial model with an independent cost base built bottom up, a written perimeter, a data room populated before anyone signs an NDA, and an information memorandum built around a growth case a buyer's investment committee can carry forward.
The standalone cost base deserves particular attention. A division inside a group consumes finance, HR, legal, IT and security without seeing an invoice, and group accounting allocates a share of that by a formula set years ago for management reporting. Buyers build their own version. Where their number is higher than yours, the difference comes out of EBITDA and then out of the price, multiplied by whatever multiple you had agreed.
Time spent here is not lost. It either goes in before launch or comes out of the price during diligence, and the second is more expensive because by then you have less room to argue.
Phase three, going to market
The buyer universe should span strategic platforms with a real product or customer adjacency, sponsor-backed consolidators, financial sponsors seeking a new platform, and international acquirers buying market access. Each values a different thing, which is the point. A field of one buyer type rarely produces the top of the range.
You approve every name before contact is made. Competitors, customers and partners are yours to include or exclude.
The sequence runs in parallel rather than one at a time. An anonymous teaser goes to the approved list. Those who engage sign an NDA and receive the memorandum. Management presentations are scheduled in a compressed window, usually two to three weeks, so that every bidder is at the same stage at the same time. Indications of interest are requested for a fixed date.
Publishing the timetable and holding to it matters more than it sounds. Bidders who believe the deadline is real behave differently from bidders who suspect it is not, and the difference shows up in both price and terms.
Phase four, from indication to signing
Indications are compared on more than headline price. Structure, conditionality and certainty of funding often separate two bids that look identical on the first line. A slightly lower offer from a buyer who has committed financing and no board condition is frequently the better one.
Resist granting exclusivity early. Indicative bids cost nothing to make and are easy to withdraw, and exclusivity is what a bidder wants because it removes competition. Grant it late, briefly, and in exchange for something.
Diligence with the shortlist runs four to eight weeks depending on complexity and whether a quality of earnings review is involved. Then the purchase agreement, the disclosure schedules, the transition services agreement and the closing conditions.
Where the time actually goes
Preparation, eight to twelve weeks. Marketing, four to six. Indications and shortlisting, three to four. Diligence and documentation, six to ten. Four to eight months from launch to completion is the working figure for a prepared asset, and regulatory approval or an unusually complex separation extends it.
The number that varies most is preparation, and it varies because sellers choose how much of it to do.
What separates a good outcome from a poor one
Not the memorandum. Not the adviser's contact list. Two things.
How much was settled before an acquirer saw the asset, and how many credible bidders were in the room when the price was set. In a middle-market process the gap between the highest and lowest credible bid is commonly thirty percent or more, and a prepared asset in front of a curated field captures the top of that range rather than the middle.
Everything in this article is in service of those two facts.
Editorial Team · Published for orientation, not as advice on a specific transaction. Any figure cited is orientation, not a valuation. See market notes.