How I Helped A Global Bank Figure Out How To Divest Non-Performing Businesses.
The Situation
In an uncertain economic climate, a global bank devised a strategy for divesting nonperforming businesses. The filter for these transactions included connectedness to international trade and capital flows. In all, the deals were worth $4.2 billion. Eight countries were involved in these transactions, which were separated into three individual buyers.
The Task
My team and I were assigned to develop the strategy for separating the technology of each business from the parent company. The parent company is a global bank, and it wants to separate each technology service from its other operations so it can transfer or operate them independently. Our first task was to build a framework for separating each business’s technology, which we called a carve-out. Once we had that we could start separating the services. We needed to build an operational capability to run these services on behalf of the buyer, so we created a Transition service agreement (TSA). This TSA was put in place after completing the deal.
The Action / Approach
Separating businesses across countries with diverse languages and regulations requires several actions that work concurrently.
- Gain buy-in from key stakeholders in business and technology.
- Form a Divestiture Management Office (DMO) for planning, oversight, and execution.
- A thorough analysis of the target acquisition’s capabilities, technology, and strengths/weaknesses
- Develop a comprehensive framework for separating businesses, adjusting for country-specific requirements.
- Consider the impact on employees and communicate changes transparently.
- Design and operate a Transition Service Agreement (TSA) with clear scope, timeline, and outcomes.
- Meticulous attention to detail and financial/operational understanding for TSA negotiation and collaboration
- Conduct thorough due diligence on the businesses being divested, including their financial performance, legal compliance, and potential risks.
- Develop a comprehensive integration plan for the remaining businesses in the global bank to ensure a smooth transition and minimise disruption.
- Implement a robust project management framework to track progress, milestones, and key deliverables throughout the divestiture process.
- Collaborate with legal and regulatory experts to ensure compliance with applicable laws and regulations in each country involved.
- Engage external advisors, such as investment bankers or consultants, to provide specialised expertise and support during the divestiture.
- Establish effective communication channels with all stakeholders, including shareholders, customers, employees, and regulatory bodies, to provide timely updates and address concerns.
- Monitor and mitigate potential risks and challenges during the divestiture, such as unexpected legal issues or stakeholder resistance.
- Conduct post-divestiture evaluations to assess the success of the process, identify lessons learned, and incorporate feedback into future M&A deals.
The Result
The successful divestiture of non-performing businesses resulted in significant positive outcomes. Here are the key results achieved:
- Enhanced Strategic Positioning: The divested businesses gained strategic importance, contributing to the growth and success of the buyers.
- Seamless Customer Transition and Satisfaction: Approx 1 million customers were smoothly transferred to three buyers, resulting in high satisfaction and positive feedback.
- Financial Impact and Cost Savings: Substantial cost savings were achieved by reducing the workforce by 300 employees and off-loading non-core activities. The divestiture improved the bank’s financial performance.
- Stakeholder Engagement and Management: Proactive engagement with employees, customers, and regulators ensured effective stakeholder management and positive relationships.
- Integration of Disposed Businesses: The disposed of businesses successfully integrated into the buyers’ operations, including identifying synergies and growth opportunities.
- Implementation of Technology Disposal Strategy: The bank’s technology disposal strategy streamlined operations, reduced reliance on external consultants, and enhanced operational performance.
