Agility by Design - eprentise Blog

Adding Value by Subtracting: Maximizing Divestiture Gains

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Written by Helene Abrams Friday, February 08 2008

The act of selling a part of a business, whether you call it a spin-off, a demerger, or a divestiture, is fundamentally different from – but not quite opposite of – acquiring or merging with another business.  The main difference is obviously that a business is being sold rather than bought – well, from the seller’s perspective anyway.  In fact, a high percentage of acquisitions result from buying a piece of a business that has been split off from another business.  Just like a share of stock on the NYSE, each transaction has two sides, a buyer and a seller, the two of which have different opinions of the value of that stock or business at a particular time.  A business is an asset that, like shares of stock, appreciates or depreciates in value with time depending on how well its assets, liabilities, and operations are managed.  The seller might think that the cash garnered from the sale of a business should be worth more than the present value of the company plus the present value of future cash flows, but the buyer obviously disagrees.

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Breakin' Up is Hard to Do

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Written by Helene Abrams Wednesday, December 19 2007

There are many reasons for separating data – each has its own challenges and business considerations. The first step in the process is to determine the business requirement, then find the relevant data, determine the criteria for filtering the data out, and determine what happens to the filtered data. Suppose for example, that you want to separate the data because your company has decided to sell off a division. Division is a segment in your accounting flexfield, so maybe you just determine the segment value of the division to be sold off, identify all the code combinations that have the value for that division, and then find all the tables that have the relevant code combination ID. Oh, you say, that’s easy. I can just write a select statement with a where clause (for division number 100) and my Oracle Applications will be separated. Not so fast. It’s not as easy as it sounds because all the transactions cannot be filtered easily based on the above condition.

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What Would Happen if You Sold Part of Your Business?

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Written by Helene Abrams Sunday, November 18 2007

Deciding what information to share and what information to keep private is one of the most critical decisions companies face when they decide to sell part of the company.  Sharing too much information allows competitors to identify advantages to use against the parent company.  Keep irrelevant information may result in unnecessary costs, such as excess storage, maintenance, and disaster-recovery charge.

A growing number of boardrooms are facing the problematic question of what information to share.

By September 2007, global divestitures had reached a record-setting $1.64 billion for the year in almost 10,000 deals, up 25 percent for the same period in 2006, according to Dealogic, a software developer for the investment-banking industry.  Divestiture, or selling off a part of the company, can be a healthy strategy for pruning under-performing divisions, responding to changes in the marketplace, allowing a company to focus on different markets, or just because cash is needed for new initiatives.  Some of corporate America’s most well known names are in the midst of divestitures, getting rid of assets that are considered “noncore” and refocusing their resources.  While divestitures can provide many benefits, executives must plan what information to share under stressful conditions.  They are expected to sustain growth and retain existing customers while reducing the impact of organizational change.

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TEChanges - Agility by Design

January Puzzle

A traveler gets lost on a deserted island and finds himself surrounded by a group of n cannibals.

Each cannibal wants to eat the traveler but, as each knows, there is a risk. A cannibal that attacks and eats the traveler would become tired and defenseless. After he eats, he would become an easy target for another cannibal (who would also become tired and defenseless after eating).

The cannibals are all hungry, but they cannot trust each other to cooperate. The cannibals happen to be well versed in game theory, so they will think before making a move.

Does the nearest cannibal, or any cannibal in the group, devour the lost traveler?

Show solution...

Solution

The short answer is the traveler’s fate depends on the parity of the group. If there is an odd number of canibals, the traveler will be eaten, but if there is an even number, the traveler will survive.

To prove this, we will consider small groups and use mathematical induction to explain the solution for larger groups.

Case n = 1: this is an obvious case. If there is one cannibal, the traveler will be eaten. It doesn’t matter that the cannibal will get tired because there are no other cannibals around as a threat.

Case n = 2: this is a more interesting case. Each cannibal wishes to each the traveler, but each knows he cannot. If either cannibal eats the traveler, then he will become defenseless and the other one will eat him. So each cannibal uses backwards induction to realize that the only strategy is to not eat the traveler. The hapless traveler finds a bit of luck, therefore, and actually survives.

Case n = 3: this is where the problem gets interesting. The best strategy is for the closest cannibal to make a move and eat the traveler. The cannibal will be defenseless after eating, but ultimately he will be safe. Why is that? The reasoning is due to induction: once the cannibal eats the traveler, the resulting situation has 2 unfed cannibals and the 1 defenseless cannibal. But as we just showed above, when there are 2 unfed cannibals, neither will make a move for fear of being eaten by the other! Thus the first cannibal to make a move will be safe as the remaining 2 cannibals block each other.

We can prove the higher cases using mathematical induction. If the number n is odd, then the closest cannibal can safely eat the traveler because the remaining number of unfed cannibals is even (and by induction, with an even number of unfed cannibals no one makes a move). If the number n is even, then no cannibal will eat the traveler, for if he did, the remaining number of cannibals would be odd, meaning he will get eaten by the induction hypothesis.

Success Tips for Oracle Project Management

  • Create a standard for documentation at the beginning of your project, and hold team members accountable for completing documentation requirements as well as keeping them at and above the standards required.
  • Before promulgating user documentation or training, it’s also a good idea to choose a representative from the among the business users base to review materials first.
  • If you are not sure about the resources and budget required, obtain several estimates from people that have experience with the same size and scope of your project.
  • Be explicit, before beginning the project, what internal resources are required for execution. This includes people, infrastructure, hardware, and software.
  • Help the project champion understand the impact your project will have on the organization and how its successful completion will make him or her an internal hero or heroine for supporting it.
  • Break up your project into smaller projects (try for projects that can be completed in 4-6 months, especially early on) to get success and demonstrate momentum.
  • Make sure that your testing includes reports, upstream and downstream interfaces, customizations, enhancements, and workflows.
  • Ensure that comprehensive transition reports and meetings between departing and incoming personnel are completed.
  • Instead of spending time and resources implementing third-party reporting, consider consolidating multiple instances, moving to a global chart of accounts (CoA), and/or standardizing on a consistent calendar.
  • Include governance, risk, and compliance management as part of the project plan.
  • Finally, celebrate the successes. Too many projects focus on defects, failures, or small cost over-runs without looking at the big picture and what was accomplished.

The Analyst Corner

John Van Decker, Research VP of Gartner, states:

"A single chart of accounts allows consistency in financial reporting across the enterprise by standardizing on common metrics and reporting structures, reduces dependencies on a separate financial consolidation system, and significantly reduces the costs incurred with ongoing, complex conversions and translations."

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