The 2 Main Reasons You May Consider Selling Part of Your Company

Sometimes it makes sense to sell a division of your company. It may be a division that is underperforming, a part of your business that is not core to your main purpose or a component that is more valuable to another operator.

In this article we consider 2 reasons why you may consider selling part of your company.

The Division is More Valuable to Another Company

Your company likely has one or a few key areas of competency. It is not uncommon for a division of your business to develop over time which is not a primary area of competency. In addition, this division may compete with other companies that specialise in that division’s services. 

For example, let’s say you own a manufacturing business. Over time, you have offered maintenance services to the customers that buy your manufactured products. 

The maintenance division of your business may have reasonable revenues, however there may be specialised maintenance companies that are better at providing maintenance services than you, noting it is their primary business. 

In such circumstances, these specialised maintenance companies may gain more value from your maintenance division than what you do. Such circumstances could lead you to consider selling the maintenance division of your company in order to extract value from this division.

The Division is Non-Core

Your company may have a primary purpose, with secondary services offered that, although complimentary, do not directly contribute to that primary purpose. 

Consider an operator of aged care facilities. The company may have complimentary service divisions that enable it to provide catering to the aged care facilities that they own as well as other aged care service providers on a contract basis. 

Although this catering division may be complimentary to the company’s operations as an aged care provider, the service may not be core to the primary purpose of the company in providing market leading aged care facilities. As part of this, management may be distracted by the operations of this non-core part of operations, working capital may be tied up in these operations, and investment in the business’ core operations may be limited due to the business’ exposure to this non-core operation. 

Such circumstances may mean you may consider selling this non-core component of the business to enable you to focus solely on your primary business activities.

Find Out More

Groves & Partners are expert business transaction advisors and valuers, with significant experience in advising clients on planning and executing the sale of a division of their company.

If you are considering selling a division of your business and would like to know more about how we can work with you, contact us on 1300 892 717 or email info@groves.com.au.

Written by Stephen Groves

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