Case Study
FTI Technology Facilitates Divestiture Rights with More Than 1,000 Supplier Relationships for Global Software Company
In March 2021, a global security software corporation, announced the divestiture of one of its business units to a private equity company. The corporation engaged FTI Technology’s Contract Solutions practice to ensure that divestiture rights with more than 1,000 vendors and suppliers were in place by the transaction close date. The team had eight weeks to complete the project.
Situation
The client announced its entry into a definitive agreement to divest its enterprise business, setting a close date of July 2021. FTI Technology’s Contracts Solutions experts were engaged in April 2021, shortly after the announcement, to plan and deliver a program to assign, duplicate or divide contracts with more than 1,000 suppliers between the client and the newly established, divested company. The aim of this project was twofold: to enable the new company to be fully operational immediately upon closing, and to help protect the client from dyssynergies and stranded cost that could result from the divestiture.
Our Role
FTI Technology’s Contract Solutions team managed the entire process, ensuring the client had all divestiture rights in place by the close date. The team delivered the following:
- Communication with all relevant vendors with the goal of quickly resolving which entity would use the contracts post divestiture, and how those contracts would be used.
- A decision-making framework to determine whether duplicative agreements would be assigned to one of the two entities, or duplicated for both.
- Various workflows, leveraging FTI Technology’s experienced contract negotiators to track master reporting records that documented negotiations and the impact, questions, talking points, various escalation points and follow ups involved with each supplier.
- Programmatic approach enabling a negotiator from FTI Technology’s team to handle all written communications, meetings and discussions relating to vendor pricing and terms and conditions, in a timely manner.
- Distribution of letters on behalf of the client’s legal and procurement teams to each entity, tracked further communications and followed up with numerous calls and emails as needed to complete negotiations.
- Advocated for signatures and/or further information from the suppliers to address any lingering issues or concerns.
Our Impact
As a result of FTI Technology’s timely and thorough approach, the divested business unit was fully operational as a new, standalone company immediately upon transaction closing, as intended. This effort successfully supported the corporation in reducing the risk of future costs or conflicts relating to contracts tied to the divested business unit.
FTI Technology also created a comprehensive contract database for the new company, representing more than 1,000 vendors with more than 25 fields analyzed in support of ongoing vendor and contract management.
Documented all negotiations and created a robust contract-specific risk profile for the legal department