One financial consideration often overlooked during the planning phase of a strategic divestiture is that of stranded cost. This silent killer cost analysis should be conducted during any divestiture.
What Are Stranded Costs in M&A Activities?
Stranded costs are recurring operating expenses allocated to a particular segment that remain with the seller after the business unit has been fully divested. Information Systems and associated infrastructure often comprise an enterprise’s largest portion of stranded cost.
Liberty Advisor Group’s Nick Tsikalis will outline the following in this post:
- Identifying Stranded Costs: It’s crucial to identify these costs early in the M&A process to avoid unexpected financial burdens.
- Optimizing Expenses: By understanding and addressing stranded costs, companies can better optimize their post-deal expenses.
- Strategic Refocusing: Divesting a business line allows companies to refocus spending on strategic priorities, but only if stranded costs are effectively managed
Read more about our experience managing Stranded Costs in M&A Activity
Download our full paper on Stranded Costs now.
