Selling divisions for future proofing your business

Future proofing your business may involve selling divisions that may not reflect core competencies or meet a changed strategic direction. This may be particularly relevant for businesses in areas of health, biotech, pharmaceuticals, IT, construction and many ASX listed companies that may have grown rapidly in the past but now may face a different future.

In our previous article we explored mergers and acquisitions as an opportunity for shoring up supply chain and staffing issues. Here we consider the benefits for executives and business leaders who may be looking to sell all, or part of their business, as a solution for navigating ongoing challenging business conditions.

It’s safe to say a lot has changed over the past couple of years.

According to the ABS June 2022 Business Conditions and Sentiments Insights 31% of employing businesses are having difficulty finding suitable, quality staff. Large and medium sized businesses including those in construction, manufacturing, electricity, gas and water, transport, science and technology, reported the greatest staffing difficulties.

The ABS also indicated 46% of all businesses experienced an increase in operating expenses with many businesses blaming more costly materials, fuel and wages while more than two in five (41%) businesses were experiencing supply chain issues.

All in all, executives and business leaders are dealing with multiple matters that are collectively causing operational headaches that are adversely impacting their bottom line.

For medium and large businesses, selling a division or a company within a group to lighten the burden of what appear to be ongoing business challenges, is a strategy that’s now firmly on the table.

Whether the reason for selling includes strategic change of direction, restructuring or slimming down an enterprise to its core competencies or simply injecting additional capital for deployment in higher margin activity, there are important matters that need to be considered both in advance for making the business or division sale-ready and throughout the sale transaction.

While tidying up business systems and processes can enhance profitability and the overall value of the business, business leaders will also need to consider less obvious matters including the following that can cause sale negotiations to stall or the transaction to fail.

Employment contracts need to meet current legislation and be properly executed, particularly for key team members who may be crucial to the ongoing operation and success of the enterprise. In some cases, a transaction may be conditional upon certain employees remaining in the business.

Employment contracts and workplace policies have become increasingly more complex and prospective purchasers may want assurance that key business leaders and team members, especially those who may have developed IP or who hold key leadership positions, will remain once the business sale completes.

Customer contracts will also need to be addressed, especially those with clauses relating to assignment of contracts to new business owners or where a change in control may require customer approval.

Customer contracts will be closely scrutinised during due diligence by a prospective purchaser’s legal teams. In turn, you and your lawyers will need to very carefully broach discussions with customers about change of ownership and understand any conditions that may impact the business sale.

Lease agreements need to be considered too as a sale will almost always be conditional upon a lease assignment so a landlord can sometimes prevent a change in their tenant’s business ownership if they are so inclined. This needs to be addressed early in the sale process to avoid a costly disappointment that can prevent the sale transaction completing.

Properly preparing the business for sale, understanding the traits of your most likely buyer, the type of sale transaction and timeframes well in advance of listing the business of sale has a raft of benefits.

A sale-ready business will not only present well for prospective purchasers it will also make the most of profitability for the current business owners until it sells. It’s common for medium and large businesses to take many months, even years to secure a suitable buyer, negotiate the sale terms and complete the transaction.  It’s therefore important to be realistic and well prepared for what can be the long haul of selling. Even if a transaction does not proceed, often the process of making the business sale-ready will result in substantial business improvement such that the process is beneficial in any event.

Next steps
As I said at the outset, business conditions have changed significantly, and executives and business leaders are exploring a raft of strategies for ensuring their imminent and long-term business success.

May I suggest taking a moment to download this strategy paper which describes the sale-ready process and sale transaction for a large privately owned specialist software consultancy.

For more information about business sales, mergers and acquisitions please contact Zac Herps on +61 (0) 7 3007 2080 or email

Executive Strategies is a specialised information hub for executives and senior managers who may have founded their own business or who work for growing private, ASX listed companies or government businesses. Its purpose is to provide access to specialist advisers and information that addresses the often-complex issues affecting their personal prosperity.

 You can learn more about Zac and our other expert collaborators here.

The information in this article is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate, we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.

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