FIN.9:4.5 - Build the seller’s divestment comparison

Compare the whole no-sale continuation with the sale proceeds and the remaining business under the proposed separation. Start with the actual net proceeds: consideration, transaction costs, tax, settlement timing, retained interests, escrows and contingent amounts as applicable. A headline price payable over time is not the same as cash available now.

Rebuild the remaining operation. Which shared services, customers, purchasing terms, intellectual property or capacity remain, change or disappear? Which costs are actually avoided, and which become stranded? Removing an allocated headquarters expense from the sold unit’s account does not eliminate the corporation’s remaining payment. Conversely, a separation plan can make a real resource reduction possible, but it must include the transition cost and timing.

Retain obligations left with the seller, including supported guarantees, tax, closure or service commitments. A transition-services agreement can create temporary revenue and cost as well as continued dependencies. Avoid counting the sold business’s future cash as still owned after also including its sale proceeds. FIN.7 supplies any retained-interest value; FIN.6 supplies separation cash and FIN.22 supplies a wider recovery-route comparison when distress governs the choice.

Ask what happens to the proceeds. Repaying debt, retaining funds for investment and distributing them have different financing and claimant consequences. Include those effects only in the alternatives that actually take the corresponding action. FIN.21 supplies the retain-or-return comparison. The sale itself does not create the investment gains of an unspecified future project.

A divestment can raise cash while reducing total value, or reduce reported profit while improving value through an attainable better use. Explain the receiving criterion through FIN.1. If liquidity is a binding condition, compare the feasible alternatives and their value sacrificed or preserved; do not present gross cash proceeds as evidence that the seller became richer.