The Idea in Brief
If your company's like most, it's geared up to buy assets, not sell them. So when you decide to divest a business, you risk doing it at the wrong time or in the wrong way.

To make the right divestiture decisions, apply these four rules recommended by Mankins, Harding, and Weddigen:

• Establish a team focused on divesting.
• Divest businesses that don't fit with your company's long-term strategy and that would create more value in another firm's portfolio.
• Make robust plans to separate out the divested businesses.
• Clearly communicate what's in the deal for buyers and employees.

Companies that apply these rules strengthen their core and create twice as much value for shareholders. Take Weyerhauser. Through its disciplined divesting, the forest-products company transformed itself from a traditional pulp-and-paper company into a leader in timber, building materials, and real estate. And it's produced some of the highest returns in its sector.

ESTABLISH A DEDICATED TEAM
Assemble a team that regularly screens your company's businesses for divestiture candidates and considers issues such as timing. Have the team establish relationships with investment banks, which often know potential buyers even outside sellers' primary markets.

Example:
Conglomerate Textron's divestiture team maintains a database of potential buyers in Textron's markets. Result? Executives can act decisively when selling opportunities arise. Since 2001, Textron has produced average shareholder returns more than 6% higher than its peers'.

TEST FOR FIT AND VALUE
Regularly identify divestiture candidates-businesses that meet these criteria:

• Fit. Keeping them isn't essential to positioning your company for long-term growth and profitability.
• Value. They'd be worth more in any other company's portfolio than in yours. By applying these two tests, you'll fetch better prices for your divested businesses. That's because you'll sell on your own terms. And stock values are likely to increase, since investors will expect your company to grow briskly as a result.

PLAN FOR DE-INTEGRATION
Determine whether you'll divest a business by selling it outright or spinning it off as a separate entity with its own shares. Choose which assets will be separated from your company and transferred to the divested unit. Decide how you'll deal with shared overhead costs, brands, and patents. Unravel cross-company systems and processes, considering whether both companies should share some of these for a time.

Example:
Bell Canada spun off its regional small business operations and rural portions of its residential wireline business. It continued providing the new company, Aliant, with some services (such as call centers and network functions) in perpetuity and others only during the transition. Aliant's stock has bested other Canadian regional carriers'. And Bell Canada has grown as a regionally focused carrier.

COMMUNICATE THE DEAL'S BENEFITS FOR BUYERS AND EMPLOYEES

Prepare convincing and honest answers to these questions:

• What actions would improve the divested company's profitability or growth?
• When will the buyer achieve the deal's full potential value?
• How should the buyer and seller share the value unlocked through the divestiture?
• What rewards (generous completion bonuses? severance packages?) will employees in the soon-to-be-divested business get by keeping it humming until the deal closes (and beyond)?