The process of finding a buyer for a business unit and negotiating the terms of the purchase agreement is done by seemingly a mysterious group of executives and attorneys. As to be expected, the Deal Team is looking at the large corporate picture with certain financial goals and a somewhat defined scope as outlined the divestiture Due Diligence. In large companies, several hundreds of millions or even billions of dollars are at stake and the Deal Team often expects that the details will be worked out at a later date. Those details are usually left to different group of people that have to determine the intent of the purchase agreement and manage through the devil that always exists in the details. The Asset Purchase Agreement (APA) most likely will include some type of technology whether it is infrastructure, applications, data, or a combination of such. It is important that the Deal Team be educated on certain aspects of technology that may either affect the bottom line of the deal or affect the timeline between the deal signing and the targeted Legal Day 1 date. If not, the technology organizations will feel the pain if the APA is written such that it conflicts with the ability of their organization to meet the timelines or included assets that may be cumbersome or costly to separate. This article is intended to provide the reader information on ensuring the Deal Team negotiates a deal that protects the interests of the seller from a technology perspective.

Before technologists can educate – they must be educated themselves. If no in-house Divestiture experience exists, hire an expert on your staff or hire a consulting company to help guide you through the process. The benefits will far outweigh the cost.

Topics technology organizations need to be at a minimum knowledgeable in:

1) Divestitures in general and the potential impact to technology resources
2) Legal, Compliance, Regulatory, Risk and Information Security requirements as related to separating the business unit
3) Divestiture Due Diligence process
4) Transition Service Agreement (TSA)
5) Licensing Agreements

Once technology organizations have been educated on the above topics, the below areas need to be in place or documented prior to approaching the Deal Team:

1) Executive Sponsorship
It is important that technology organizations have the appropriate executive sponsorship and involvement that can provide the Deal Team with guidance on contractual obligations being considered in the APA.
2) TSA Services
Prepare of list of TSA services that are typically included and excluded in a divestiture and brief rationalization or impact. The excluded services may include electronic mail, mobile phones, and desktops.
3) Licensing
Hardware and software licensing can be a considerable expense if included in the deal and can have real impact to the bottom line of the deal. There is a distinct difference between a Right to Use license versus transfer of a license.
4) Technology Assets
Prepare a list of infrastructure and/or application assets that cannot be included in the deal. These assets may include computers that are leased or applications that span other areas of the company that must remain behind to support the remaining business.
5) Timelines required to complete separation
Depending on the requirements from Legal, Compliance, Regulatory, and Information Security, there may be significant amount of work required to separate the business unit prior to the Closing Date. Activities may include movement of people, application logical or physical separation, and data/voice network installations.

In closing, it is important that the team that is negotiating the Deal with the buyer must understand the implications from a monetary as well as timing perspective prior to signing the Asset Purchase Agreement. It is the responsibility of the Technology leadership to understand the scope of the Divestiture in terms of people and technology, and weigh in on the impacts on the ability to execute the pre-LD1 activities.  Not to do so, may result in increased expense to the selling company and inability to meet the contractual obligations.