Mergers and Acquisitions

Chapter 8. Sales and Divestitures

Introduction

There are two general types of sales of an enterprise: the sale of an entire business and the sale, or divestiture, of a segment of a business, such as a subsidiary, business unit, or product line. The dynamics associated with each of these two categories of sales transactions are quite different. Accordingly, each is discussed separately herein. Section Sale of an Entire Business addresses issues relevant to the sale of an entire business, and section Divestitures discusses those associated with divestitures.

Sale of an Entire Business

The sale of a business may be initiated in a variety of ways. The owners (in the case of a closely held business) or the managers and board of directors (in the case of a publicly traded company) may seek to be acquired, or they may be approached by an interested potential buyer or its representative. In addition, the sales process associated with public company sales or mergers is considerably different from that of private company transactions. Also, the dynamics of sales of private companies that are unsolicited can be quite different from those that are initiated by the seller. The factors affecting these various public and private transactions are discussed in the sections that follow.

Acquisitions or Mergers of Public Companies

Public company transactions fall into two distinct categories: “hostile” takeovers and “friendly” acquisitions or mergers. Hostile takeovers represent an extremely small percentage ...