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Managing The IT Divestiture

by John McClain


While divesting a business entity can have significant positive organizational and financial advantages to a company, divesting a corporate entity can also have a big impact on corporate morale, organizational complexity and lead to significant business disruption unless the divestiture is properly managed. Corporate and government regulations, along with typically tight deliverable lead times, require divestitures to be well planned to ensure successful separation of the divested operations.

The purpose of this article is to help the reader identify some of the key focus areas of a divestiture process in order ensure a smooth transition from seller to buyer.

Due Diligence Phase Activities

Due diligence is an on-going process that begins with the divestiture investigation, intensifies around buyer qualification and negotiation and culminates with final contract negotiations. It is a two-way process between the selling entity and the potential buying entity. Due diligence is every divestiture team member’s responsibility.

The divestiture Negotiation and Transition teams conduct most of the due diligence activities. As appropriate, specific Business or Information Technology teams are brought in to provide additional clarification as the project advances. The Project and Negotiation teams often focus on high-level, high-impact due diligence. The Transition team often confirms previous assumptions and provides this information to the Project and Negotiation teams.

The objective of the due diligence phase during a divestiture is to ensure that seller’s best interests are maintained and to provide the prospective buyer with enough information to understand the business that they are buying.  At the same time, the seller must be cautious to not provide too much information to the prospective buyer since there is intellectual property that could damage the seller should the sale not transpire.

Proper due diligence planning is the key to a successful and timely final contract closing.  The selling entity must provide considerable information on the divested operation to the buyer.  It is very easy to underestimate the amount of time and energy required to satisfy this requirement. A due diligence timeline must be incorporated in to any transition plan and dedicated resources should be identified and assigned to the task early in the divestiture project. Often, these tasks are managed by the Transition Manager in coordination with the project team.

Due diligence data and delivery form are negotiated with the buyer.  If on-sight delivery is used, the typical delivery method is to establish a Due Diligence conference room and keep all documentation localized to that area. Information requirements are wide-ranging and may impact many different organizations including:  IT, R&D, Finance, Personnel, Marketing, Facilities, Manufacturing, and other corporate organizations. 

Due diligence consists of a period of time where the following business objectives should be fulfilled:

  • Verification of all information and assumptions which might significantly impact the valuation of the divestiture transaction (ownership confirmation of IP, assets, etc.)
  • Uncover potential liabilities which impact the value of the deal to the seller or open it to potential legal issues with the buyer post divestiture
  • Discovery of any additional costs which the seller might incur in order to divest the business (true-up of software licenses, etc.)
  • Provide information to support any Service Level Agreement requirements with the buyer.

The due diligence period also supports the identification of several IT activities, and accomplishes the following IT goals:

  • Proactively work to have a preliminary set of Service Level Agreement requirements prepared and presented to, and agreed by, the selling IT organization.
  • Identify current technical and application architecture of the divested company and preliminarily identify the complexity of the divestiture for the selling entity.
  • Define preliminary IT Divestiture Strategies and locate the appropriate IT resources to provide preliminary cost estimates for the divestiture strategies.
  • Develop detailed technical divestiture plans.

Transition Phase Activities

Following the close of the divestiture, there may be follow-on activities that need to be completed as part of a Service Level Agreement (SLA), or corporate close.   Some key areas to consider are:


Employees who are included in the divestiture should be removed from Email, Badge, VPN/Network and all other internal technical accounts or systems.  In some cases, the divested employee will need to retain access to those functions, as they are retained as consultants to help with the integration.  In these cases, all ex-employees in this category should be treated on a Contractor basis.



Divestiture of the IT Assets includes:  Hardware, Software, Web Servers, Shared Drives and Network technologies.

Access from the acquiring company should be limited and only provided as absolutely necessary.  Service Level Agreements should specifically state how these assets will be supported post close, and the term of this support.

Software applications should be physically segregated from the corporate infrastructure if it is part of the sale, or if it is part of a support service provided to the acquiring company.  Any server which will be acquired should be physically or logically relocated out of the selling company’s data centers unless they are part of a service contract performed as part of the sale to support the transition.  In this case, this technology should be completely segregated from the remaining corporate infrastructure.

Any equipment not transitioned to the acquiring company should be reclaimed and/or retired.


Access to corporate data should be segregated by the acquiring companies own IP address space.   If new or additional IP addresses are required they should be registered in the American Registry for Internet Numbers (ARIN) to reflect the new ownership of the IP addresses.  There may be opportunities for support contracts if business partner connections, internet connections or any additional network connections are required to temporarily support the acquiring company’s interim architecture.

Access to local data should be terminated as appropriate.    Prior to a divested employee leaving the company, it is important that the seller ensure that all company proprietary intellectual property is recovered from those employees.  In some cases, the employee will be taking their PC with them.  In these cases, it is important to ensure that all company owned software and intellectual property is removed from those systems.  Similarly, these employees may have hard copies of data that must be recovered before they leave their employment.  The company information policy should be strictly adhered to during the divestiture process in order to protect corporate intellectual property.


Access to facilities by acquiring company personnel should be limited.  Separation of the physical plant and network is the objective at the time of close.   Separation of any physical space should be completed if there are any shared work spaces.  Physical security is fundamental to a good IT security program.

Pinnacle Intertech

While it is impossible in this space to provide the reader with all of the necessary information to complete a successful divestiture, we have attempted to highlight some of the key areas that we feel are important during any merger, acquisition of divestiture project.

Pinnacle Intertech is here to help you with your acquisition or divesture project support needs.  Our team’s experience includes:


    • Merger, Acquisition or Divestiture Project Management and Integration Planning
    • IT and Business Due Diligence Support
    • IT Department Synergies and Cost Optimization
    • Development and Negotiation of Service Level Agreements between Companies and Service Providers
    • Business Process and Technical Integration or Divestiture Analysis and Support





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