Divestiture, the process of selling off a portion of a business or subsidiary, can be a strategic move for companies looking to optimize their operations, focus on core competencies, or raise capital.
A recent study conducted by PWC underscores the significance of divestitures and emphasizes the importance of actively refreshing a company's portfolio. While divestiture offers numerous benefits, such as increased agility and financial flexibility, it can also be complex and time-consuming.
To do this effectively, savvy businesses rely on expert collaborators such as Employer of Record (EOR) services, global legal firms, and immigration consultants. To cover all of an organization's divestment requirements, it may make sense to use all three.
Within this article, I will explore the advantages of divestiture and how these expert partners can support and streamline the venture.
The Role of an Employer of Record (EOR)
An Employer of Record (EOR) facilitates global expansion for companies by enabling them to hire foreign workers in a country without establishing a legal entity.
They can help global companies with divestitures in the following ways:
During a divestiture, EOR services can ensure compliance with labor laws and regulations in various regions. They handle payroll, tax withholding, and benefits administration, ensuring a seamless transition for employees affected by the divestiture.
EOR services can assist in retaining top employees during and after the divestiture. They offer comprehensive HR support, including talent management, which can help keep valuable talent within the company.
For example, we helped a fintech company from the UK which was divesting its business in Asia. Our EOR services played a pivotal role in retaining local financial and tech experts under stringent Singaporean labor laws, all while the divestiture was completed.
EOR services can quickly adjust workforce size and structure to accommodate the changing needs of the business post-divestiture. This scalability can help maintain productivity and adapt to market conditions.
Leveraging a Global Legal Firm
With a presence and expertise across multiple countries and regions, a global law firm can play a pivotal role in a company's divestiture process.
Using their extensive experience in mergers and acquisitions, legal firms address all legal aspects of divestiture. They help with due diligence, contract negotiation, and regulatory compliance.
For instance, I worked with a luxury brand from Asia divesting its business in Europe. Our EOR services, in collaboration with a French legal firm, managed the HR process for local sales staff, showroom managers, and even local marketers. As a result, the company avoided any nasty labor law penalties.
These firms conduct thorough risk assessments to identify potential legal hurdles and liabilities associated with the divestiture. Risks include significant disruptions to a company's operations, valuable IP and knowledge loss, and regulatory challenges due to non-compliance. Legal firms can develop strategies to mitigate these risks, protecting the company's interests.
Structuring the Deal
Global legal firms can advise on the most suitable deal structures for divestitures, such as asset sales, stock transfers, or joint ventures. They ensure that the chosen structure aligns with the company's goals and maximizes value.
Collaborating with Immigration Consultants
Companies undergoing divestiture across multiple countries may choose to seek guidance from immigration experts with local knowledge and expertise in each respective region.
In international divestitures, immigration consultants play a crucial role in managing employee mobility. They assist in obtaining the necessary visas, work permits, and immigration documentation for employees transitioning to new jobs within the company or relocating to other countries.
Navigating immigration laws can be complex, especially when dealing with global divestitures. Immigration consultants ensure that the company and its employees remain compliant with immigration regulations, reducing the risk of legal complications.
When an Australian tech firm secured a contract in Toronto, the need arose to temporarily move some of its Australian team members. Our EOR services took care of the local employment obligations in Canada, while immigration consultants facilitated the swift issuance of necessary work permits.
Immigration consultants have established relationships with immigration authorities, enabling them to expedite visa and work permit applications. This speed can be critical during the transitional period of a divestiture.
Divestiture offers a range of benefits for companies seeking to elevate their operations and financial position. However, executing a successful divestiture can be challenging, requiring the expertise of various professionals.
Employer of Record services, global legal firms, and immigration consultants are essential for making the divestiture process go smoothly and efficiently. They help reduce risks and increase the company's value.
By employing these specialized partners, businesses can focus on their core competencies and experience the full potential of divestiture.