Executing Divestitures

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I'm Kisam Patel and you're listening to M and A Science, where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during MA deals. Welcome to M and A Science Live, where leading M and A practitioners share lessons learned from their experience. When you use proven techniques in M and A, more value is created. If you're interested in keeping up with the latest from Mascience, visit mascience.com and subscribe to our newsletter. Again, that's mascience.com I I'm your host Kisan Patel, CEO and founder of M&A Science in Deal Room. Joining me today is Rhonda Rhine. Rhonda Rhine is a Director in Business Development at Thomson Reuters. A former tax accountant, Rhonda has been involved in M and A transactions and integrations for over 16 years. From 2011 through 2019, Rhonda worked exclusively on all Thomson Reuters divestiture transaction and has extensive experience with preparing and managing Transition Services Agreements, otherwise known as TSAs. Currently, she is engaged in both acquisition and divestiture transactions and manages process improvements to Thomson Reuters due diligence process and other business development initiatives. Today we're going to talk about divestiture lessons learned. How are you doing today Rhonda?

I'm great. How are you?

Wonderful. Thanks for taking the time with me. Maybe we can kick things off with a little bit about your experience and how it's been with divestitures.

I'll try to be brief with my story to just give you a lay of the land of my journey. As you said, I'm a former tax accountant. I joined Thomson Reuters Almost 20 years ago as the sales tax manager for our legal businesses. Part of my role was to identify the tax product codes in SAP so it would be taxed appropriately. Well, we started doing acquisitions and the Order to Cash team would come to me and ask me what should I code this? And I'm like, I don't even know what you're talking about. So I started attending their meetings and learning more about what we were acquiring and I realized Quickly that there's more to the world, especially at Thomson Reuters, than the tax department. Then maybe a year or so later an opportunity came up to manage that order to cash process for the legal businesses for those acquisitions. So I managed all of the numerous areas within order to cash for due diligence and then also the integration planning. A few years later our accounting group decided that they wanted some oversight on financial integrations and more. So setting up correctly an SAP which is our main system. This was for all segments and globally. So I jumped at the chance because it kind of tied my newly found M and A acquisition experience, tied it with my tax finance background. So I did that for a few years and then it was in 2011, Thompson Reuters decided to kind of evaluate their portfolio and we identified some non core assets that were going to be divested. Well, the first project I worked on, I was working on it from a finance perspective, but the general manager of the business being divested was the one organizing the process. And I said, hey, I've been doing this for like five years now. There needs to be some structure, there needs to be some governance. We need some cross functional representation from the Thomson Reuters side. We can't have the business being sold making all the calls. I put together a proposal to create a new role for some oversight into this process. Ten years later I'm still doing it. And ironically it was supposed to be a temporary position and it's definitely not because we continue to divest quite a bit. From 2012 to 2016, we did almost four, 40 divestiture projects. Two major business segments as well as a couple of larger car boats and then a smattering of smaller businesses and products.

You're a divestiture expert.

Nobody's an expert at divestitures because there's just, there's so much to know. So when I first created this role and first got into it, I was fortunate that we had a lot of acquisition activity as well. So we had designated or dedicated leads in many, almost all of the functional areas. So I pulled that team together and we said, okay, now we've got to look at the sell side, not the buy side. What should we do? So we used basically what we use from a buy side. But we quickly realized that this isn't the same. It's not. We know what we're buying and what we're going to integrate and what our end state is. Well, we found that with divestitures you're starting to disentangle something that's highly integrated and something that we haven't done before. On paper, it can look simple, but when you start getting into the details, the technology pieces, it can get very complicated very quickly. So I do have to share a story. That first divestiture that I worked on. So it was a smaller deal. You know, a handful of employees were impacted. We had a tsa, a transition services agreement in place. So really it was like nothing was going to change on day one other than ownership and that the employees would be the buyer's employees under their employment and everything else. It's like systems access. People are just going to continue to do their job like they had before close. We closed the deal on a Friday. That Monday, those employees came to work and their offices were cleaned out. No equipment, no phones, no access because they had been taken out of our payroll system. It was as if they were terminated, even though we knew they needed to look and feel like an employee. And so, needless to say, we had to scurry and try to find some solution to that. We did. Unfortunately, it was manual. I was the one managing that process because it didn't fit anywhere. And it took a couple of years to get the attention of our technology team to try to automate it because we started getting bigger deals and more employees. And it was critical that those employees had to have access to what they had done prior to close until their new buyer could get them on their own. Infrastructure and systems.

What kind of advice would you give to somebody that's doing this for the first time and doesn't know where to start?

You have to go into it with an open mind. I was just talking with a colleague just earlier today and about someone wanted to get into the M and A, and they're like, oh, they think M and A is all, like, sexy and everything. And that's fine if it's acquisitions, because you always want to buy something that's going to grow the business or enhance the product. When you're working on selling off a business, it's not the same. I say it's the least glamorous. Just because you're getting rid of something, and it's always for a good reason, but you're still. You're getting rid of something. You may not know what needs to be done, but you have to start somewhere. So hopefully you have some kind of starting point, some kind of project plan, and hope that you have some good resources that you can rely on. Because our company, we're very collaborative, and I've been very fortunate over the years to have some really great people who are open Minded and willing to do trial and error. If it doesn't work well, then what will work? Let's try something else. We're adaptable. And just recently I started to reconnect with some people because we hadn't had a lot of deal work last year and people are just energetic again. It's just, okay, what's changed that we need to fix or what's unique about this deal? And so I guess my answer is like kind of a non answer. Now. You can have a foundation, you can have some of the basics, but until you know the product you're selling, know the business, you know the team dynamics, you really kind of have to play it by ear and adapt to what the asset is that you're selling.

That's interesting. It's almost like there is that trial and error. You have to be adaptive and flexible to learn this as you keep doing the process.

And it does come with experience. I think it's great that people have interest in learning about M and A or divestitures, but I think you also have to be patient. You know, you can't just expect that you're going to be an expert because you do one deal. I think in most cases you're probably more frustrated. Some of these young kids that are doing rotations and they want to, you know, have different experiences, they want to excel at everything they do. Don't expect that with M and A because, you know, maybe, you know, you knock it out of the park on one deal because it maybe it's straightforward or it's a large deal and you have external bankers and you have external consultants, but some of these smaller ones that you've got limited resources. It's just the business management team. There might be some just nuances of the business that are specific to that business that we haven't dealt with before. So you kind of go, now what do we do? You just have to really be open, to be adaptable, to like, change and to welcome it and to expect things not always to go the way as planned.

I think it's the same for international divestitures.

Yeah, international gets tricky mostly from an employee employee standpoint because there's different trade unions and labor organizations. So the US Is easy. I say that facetiously, of course. My HR counterparts are probably like, wait a minute, what's she talking about? But for the most part, there's those issues with different labor laws. You have to have consultation periods. There's a lot of upfront work. A lot of times you have to get local legal counsel involved on the nuances in that country. And then the other thing that we've dealt with that's been challenging is particularly India and maybe some other countries where we've got established employees and offices and operations. But the buyer may not. It can take months and months for that buyer to set up a legal entity to be able to take the employees on, to build benefit plans, to find an office location. And so that's where oftentimes we can get more complicated TSAs, lengthier TSAs, and sometimes we even have delayed closes. So we might close part of the deal, but we'll have what we call a delayed close until that legal entity can be established.

What are some of the common misconceptions of what a divestiture is?

First and foremost, I'll probably say it more than once. A divestiture is not the reverse of an acquisition. It's like nails on checkboard for me when someone says it. And I get it, because M and A can be kind of a niche business as it is. But divestitures is like a niche inside the niche. It's a portion that a lot of people just haven't had any awareness of or any involvement with. I know even some of our leadership when I've maybe made a comment to someone that, yeah, we've done 40 deals to date, and they're like, well, I thought we just sold this and this. Yes, that's what we announced we sold, but we sold 30 other things since then. And so I think it's just an awareness, and I think I mentioned already that, you know, we don't always announce. We typically don't announce externally unless it's something large and public. Even internally, we don't. So it's really getting that communication out there, but it's not the same. It's not the reverse. I think also for divestitures, I don't know if people just, again, because they just don't know enough, but they're more work than an acquisition because not only do you have to come up with that plan for disentangling, but there's the TSAs. We have a TSA for almost every deal that we do because usually the product of the business that we're selling may need time for the buyer to get itself in place or have time to migrate. And some areas take less time. But technology is always a big one. Whereas when we acquire, I haven't been involved in acquisitions up until last year, but from what I know, we typically don't have any type of tsa, so we just Say, hey, we're buying this lock, stock and barrel and then we figure out how we're going to integrate. Whereas from the sale side of it, we almost always have the TSAs that can go on for usually at least a year. And the longest I've had has been three years. It gets tiring.

Divestiture is not the reverse of acquisitions.

Also, we don't just haphazardly just get rid of something. We don't just all of a sudden say, oh, we don't want that. There's a lot of thought that goes into analyzing our portfolio, really considering what we feel is non core and why. We regularly review our portfolio to find out what's not strategically fitting right now. And the businesses are really responsible for at least initially identifying that. And then they have to prepare their financials and their marketing materials. This is a great business, but here's why we can't support it right now. It might not be growing for us. We might not want to throw capital at it. We just don't, like I said, just don't haphazardly say, oh, it's time to divest. Xyz.

Is there an ideal period of when an organization should do that review? Is that like an annual thing? Quarterly thing?

Our business segments are continually evaluating as time permits. And in fact last year there was quite a deep dive into almost all of our products. Just to say what fits and what doesn't, there's thought that goes into it. Our leadership is very supportive of it. We want our business segments to be successful. And if there's these little pockets of businesses that maybe it was an acquisition that just didn't get fully integrated, just really didn't recognize the synergies, but it's a good business if it were managed by somebody else. Things like that. We want to take into consideration to see where is there a good home? That's our main objective, is to find that good home. We want to make sure that the employees are happy, that our customers have a seamless transition. And sometimes we might sacrifice some value for that because we know that this buyer is going to be able to build this product, to grow the product, to get revenue, to make our customers happy. Because our customers, we have a lot of products and they could, if we're selling one or selling a business, they likely have more. So we want to make sure they're happy and help them to transition to this new buyer.

I like that view of what's best for the business, both sides, for the company itself and the overall business. Are there any Other components on how a divestiture would fit into a company's overall strategy.

Like I said, if it's non core, we try to be clean. Like for example, years ago in our tax and accounting business we wanted to focus on software. So the service businesses just didn't fit the strategy at that time. That was one overarching strategy we had. But you know, it really is up to the business unit. And sometimes too there has to be the consideration of what do we think we want to buy or what are we going to build. And then depending on that build buy strategy, how does that impact the existing business? And so there might be places where either maybe that existing business that maybe was thought of as non core would now be more core with an acquisition or additional investment.

Got it. That makes a lot of sense. So really going always back benchmarking against the strategy for your organization, which obviously shifts and changes as its own pace as well.

Well, and it's interesting because I've been doing divestitures since 2011, probably about 2014. 15. Yeah. So I was just keeping a running list of all of the divestitures that had closed and I took a closer look at it and went, huh, I worked on that acquisition, worked on that integration. Oh, I remember when we acquired that and it was like two thirds of what we were divesting we had acquired. But that just shows our shift in strategy and where things fit in at the time.

Well, there's obviously the speed when she shifts. But like what triggers this is simply, hey, we got a new CEO and all of a sudden they want to.

Turn the ship or it's our customers. We want to make sure that we're providing the best quality of product, the most value we can give to our customers. They're the main view of what we consider core and what's not. So we really want to make sure that the customers are getting what, what they want and what they need.

When you get to that point and the decision is made to divest of a business or the let's just back up. Let's say, hey, we decided that this business line no longer fits our strategy, what happens next?

The business will present it to their leadership will, if they approve it, then business development, my team will get involved and start the process. So we'll work with the business team which will basically be the business lead, technology, product, hr, finance and any other key management. So that'll be kind of like the core business team. And so they'll polish up their financials, they'll get their business overview Done kind of get it ready to launch out to buyers. Larger deals, we always get an external banker. That's what they do. They manage that sale process. And I or our business development team will help shepherd the internal team through that. But for the most part, the larger deals are led by the bankers and we always have external legal counsel. I shouldn't say always, but the majority of the time we do. So biz dev will will manage those external relationships. For some of these smaller deals, we may have a banker if we're going to have multiple buyers, because they do help manage that relationship and kind of be able to compare and contrast and keep those different buyers kind of segregated. Whereas sometimes, and it's been more recently, we might have somebody approach us, they're like, hey, are you willing to sell xyz? And it's like, let's think about it. Or we might say we've identified this as a non core asset, who would be a good buyer or who would be a good placement. So we might reach out to someone as well. And so when we're kind of one on one or working with one buyer, and depending on the size, I'll manage the process. We won't get a banker involved during the process. We get the due diligence materials ready, we get a data room ready. I do have to do make a plug for HiQ, which was a 2019 acquisition for us. We use our own product for our virtual data rooms. So we go through that whole process. And then as due diligence is progressing, we're also working on purchase agreements and all the legal documents in parallel. And at some point then we need to bring in the shared services. A lot of the technology folks, maybe there's additional finance or billing. That section's not dedicated to what has been identified as the asset to be sold, but they have input into it and there'll be a TSA for that piece of it. That's where really a lot of my strengths lie, is in the creating. The TSA is getting service descriptions, costs, reasonable terms. We are very open to help out the buyer. We always say that the TSA is accommodating the buyer, trying to help facilitate the sale, let them know that, hey, you know what? On day one, lights aren't gonna be turned off and it's gonna be business as usual. So don't worry about it. We do try to limit the amount of services though, because you offer up a menu of 20 items, people are gonna take it. You offer up 10, they might ask for 12, you might say, I'll give you eight. Negotiate that. But we're not a service provider. Thomson Reuters isn't a service provider. So we also have to make that clear that you're gonna get the same level of service that you had prior to close. So if you didn't like what you had, we're not making any changes. We're not adapting how we're going to do something most of the time that's acceptable. Sometimes some buyers are like, why can't you do this? And we don't have the wherewithal to be changing our billing systems, for example. You know, we just can't do that. It's just too extensive. And so we just have to come up with a way to help them continue their business. But I think it also motivates them. They don't like what they've got with Thomson Reuters, then they need to get it onto their own systems. And sometimes it's just not technically possible. You know, it's just. It is what it is.

All right.

And another point from our approach to the tsa, since we're not a service provider, we're not marking up costs, we're not making money on TSAs. You probably lose it, because a lot of times we'll include things like license costs and just the true incremental costs of providing that service for the business that was sold. But a lot of times we don't even include the people costs, doing it out of the goodness of our hearts. We're just, you know, because again, we want that successful transition because our customers are the ones that are going to be impacted if we're not partnering well with the buyer.

You ready for some fun questions around all this stuff you just went through? Because I want to take this apart and make sure I get the details correctly, the prep part. And I guess specifically I want to understand what makes Divestitures so hard, because anybody that's actually worked on divestitures is very similar to you, Rhonda. Very adamant about the complexity and the work that actually goes into it, especially as you've also had experience with integration and contrast the two. What really makes it so complex, and I want to also get a sense of is this in the beginning stage when you're prepping the company to sell, or does the complexity come later?

It depends. It depends on the business. Because sometimes at face value, I'll give an example. We had a product or business that we had up for sale a while back, and I hadn't been involved in the beginning of the transaction. We had a buyer. We had someone approach us, they wanted to buy it, and then for whatever reason, it didn't work out. So then we put it out for sale and then we found somebody who was interested. I was unaware that we hadn't really dove into the product itself. And it turned out that the complexity of the product, we had some homegrown components, we had third party licenses. So there were all these components that made up this product. And the potential buyer looked at it, they did some extensive due diligence and just finally said, ooh, we can't make this work. You guys get for your licenses, you guys have this enterprise model, you get a great deal. If we were to replace that, it's going to cost us 10 times the amount. We should have gone through that exercise before we even put it up for sale. But I think we didn't because we had. I think it was a competitor who was like, hey, I'll take it. And then it just didn't pan out. So it's really important to identify the asset and I think then that will help with the complexity of it. But even if we think we've got all the T's crossed and I's dotted, as you start separating, you might see things that you didn't know existed. I think that's what makes it complicated. Like I said earlier, when you're integrating, like, we know what our billing system is, we know what our CRM system is, we know what we need to do. It might take us some time to get there, but it's like, oh, we have to convert this data into this format to load it into our system. Well, one, sometimes we just don't know what we have to untangle. And then the other piece that complicates it is the buyer needs to drive what they're going to do with it. So if they don't have a clear end state or a clear migration plan, it makes it difficult for us because we don't know how to help. So we're just going to be like, okay, it's going to be business as usual until you tell us what you need. That can get frustrating because the buyer might be looking at, this is a great product. I'm launching it to my sales guys, let's get out there and sell. Yeah, but what about the back office? How are you going to move the back office off so we can get out of this tsa? So they might have competing priorities that might delay, they might be inexperienced. They haven't done it before. So a lot of times our team is very helpful about that and I don't know how many times people will come to me saying, okay, my counterpart at the buyer is asking all these questions, is it okay for me to give them advice? And I'm like, you think it's legit and it's going to help them? By all means. We don't want to just be like, oh, we're not going to help you. We want to be successful.

So first part is really preparation, particularly defining what exactly you're selling. This is maybe when you're creating those financials around this business that can stand alone. And also the operating model.

Yeah. And then just reminded me too, that because we're so integrated and because we've got this enterprise model with all these shared costs and allocations, from a financial standpoint, there's all these pieces that might go in there or they may not, or people don't exactly know what's coming from where. So trying to carve out those financials gets complicated. And also it depends on if it's a legal entity, if it's an asset or a stock deal. Carving out assets is one thing, and sometimes it's very obvious of what it is. Oh, you're going to get these employees that support the business, you're going to get their computer equipment, you're going to get a couple of servers, boom, go. But if there's different legal entities involved, we may or may not sell that legal entity. We might have to take some of the legal entity and carve it out and put it into another legal entity or they're going to have to create one. So you get that legal entity piece in there too. That can really create challenges.

A lot of tax considerations that come with that as well.

Exactly. So I was a sales tax person or indirect tax person for most of my life, not a direct tax person. So I'm glad we have expertise in that because it can get complicated, especially different countries and different ownership of assets. So there's a lot to be thinking about in that case too. So that can complicate things.

How early are you starting to think about TSAs?

Pretty close to the front of the process. The initial probably two, three weeks is gathering the due diligence, getting the data room ready, getting, getting the management presentations. The management team, that's the business team, they'll be doing some sessions with the buyer on certain topics or certain functional areas. But I like to tell the business team, who, for the most part, a lot of them have not been involved in a deal before. So it's really important to kind of Lay out what the process is and help guide them through that. I start taking it for granted with, oh, yeah, just get the due diligence materials. And it's like, well, what do you want us to gather? And the buyer should really be the one providing that request list, because that's what we do from a buy side. But if you don't have a sophisticated buyer, we sometimes have to be proactive. They're going to need this financial information, they're going to need this operational information. So there's a little educational aspect too, with the business team. But what I like to tell them is, okay, as you're gathering this and as what's going to transition to a buyer, what's not going to transition? What do you rely on? Do you rely on our centralized reporting, our FPA team? How integrated is your billing? Some of our business units have their own standalone billing, and maybe it's from a regulatory purpose or it was an acquisition, but if it's not, then we have to figure out, okay, how are we going to separate that out? How are we going to carve that out? How long is it going to take us to do it? So I want them to be able to think about what's shared, and then I can bring in the expertise from that, those shared areas to say, okay, here's what Business X has identified, what they think is a need. Now, this is your area. How can we help them? How do we determine what they're gonna need for a tsa?

So I'm gonna go through the timeline of this divestiture process. And as I go through this, it almost seems like these TSAs kind of shape, because at this early stage, it's almost like an outline. Like we're identifying where these TSAs will fill in some gaps and start identifying where we would need the coverage. And then as you go through this, we're preparing the financial models, the operating model, the legal entity, looking at the tax issues, and then really preparing all the diligence information. As you mentioned, you may have a range of buyers. You may be working with a banker to run a broad auction process. It may be a targeted process that you're running yourself. But we're regardless, going to have some effort around preparing this diligence information or even the marketing material. If we're going through that broader process, then we start engaging with buyers, and then obviously we've got a range of the buyer requests that are going to come in different levels and scope and whatnot. And then your team is responding to that. Sound good? So Far.

Yep, right on point.

As we start approaching to a letter of intent terms, what are other components that would come up for divestitures? Is this where TSAs start shaping more as we get to LOI or does that come after?

Well, we usually get the LOI or the IOI before we start due diligence. That's what kind of kicks off due diligence. And so then through the due diligence process and as we're drafting up purchase agreements and the terms in the IOI or LOI might change, but for the most part, that's what we're operating under is whatever that LOI or IOI was from the potential buyer.

Got it. So a lot of the real negotiation with TSAs are going to come after LOI.

Yes.

I feel like the terms of the TSAs, a lot of the values behind the deal can be really dependent on what kind of terms you have. Because in your case, you said, hey, we're pretty friendly around making sure that there's good continuity and transition where you could take another leg on it and saying, hey, we can create some revenues with these TSAs and really build some margin there.

I don't want to be in the business of TSAs. I'm going to keep the scope as limited as possible. But to your point on that, we do the best we can. We anticipate what we can to the best of our abilities. Because even though we get some shared service involvement, there might be some frontline resources in the business that we can. I mean, we just, they're not in the circle of trust or the under the tent. And so we have to make assumptions. We do the best we can to anticipate what we think we're going to need. We do always have, like, broad terms within the body of the TSA that will state we missed something. We use reasonable efforts to do, blah, blah, blah, because oftentimes when you start separating and it might not be 30, 60, 90 days into the TSA where you discover something, maybe it's an annual process that somebody does that. Oh, totally forgot about that. We're not going to say, oh, it's not in the tsa, so we're not going to do it. You just, you adjust as you go through. And we always have language to cover. Like if there's third party expense for something that we didn't know about, we should be able to pass that through to the buyer or consult with them beforehand. You know, we have language, legal language, that will protect those unknowns.

That makes a lot of sense to have that in place when you go through this. You're going through now after loi confirmatory diligence and we're getting to close. Sounds like a lot of it's going to be around negotiating those TSAs, finalizing them in conjunction with your, your PA. Any other unique considerations when it comes to divestitures or activities outside of that?

Just to close, to finish off the renegotiating the purchase agreement, the TSA shouldn't have a lot of priority. It shouldn't be. It's never going to hold up a deal. It just won't. If we have to make accommodations on our side, we will because it's not.

Is that just one TSA or do you have multiple TSAs?

When I say TSA. So we've got the legal agreement, which is the TSA and then we have a TSA schedule of services. So within that schedule of services we have it broken down by functional area.

Okay.

So we'll have, if we offer finance or billing, we'll have posting, we'll have cloud service provider, we'll have employee technology, employee access, laptops, things like that. Typically we don't do like HR services, but we may, if there's some issue with another country, like they don't have a legal entity, they can't take employees on or there's a delay in creating benefit plans or again the legal entity. So each area of the TSA schedule will have its own term. A lot of times the terms are the same because they have to. You can't take off hosting before you finish something else or vice versa. But then there's some things too that might be like the low hanging fruit that, oh, they just need to transition this marketing something and we can do that in 30 days. So that might be something that it just be a, it's not really a condition to close. It really, truly is a transition service. Some of the things that, and here's, I guess maybe this is a misconception that I just thought of right now is that part of the. The purchase agreement is going to be the purchase of the books and records of the business. So extracts of our billing, our financials, all of that's part of what you're getting when you buy the app. We've had some buyers say, no, we want this written up in the tsa. And I argue, in fact just did this two years ago and it was painful, we finally gave up. But it was like, okay, fine, it's not a transition service. It's not something that we're doing on your Behalf until you can move it. This is something that we have to do as part of the sale. But we finally just said we're wasting too much time arguing on this basic point. Fine. There was like no charge for it, they just wanted it written up. So anyways, once we get to the point where we're ready to sign the deal, we always like to sign and close at the same time. But there might be things that happen, there might be some regulatory review that needs to happen. So we can't, as I mentioned, the buyer might need to create a legal entity. So we have to. You can't transfer those assets until that entity is in place. So those would be things that we'd have under the TSA as well.

Got it. That sounds like a lot of things to negotiate these TSAs. Almost more than the agreement itself.

No, I wouldn't say that it sounds like a lot because this is what I do. So I'm very passionate about it. But believe me, I've been on those calls when they're negotiating the purchase agreement. And now TSAs are easy compared to that.

We get to close. What happens after close? What responsibilities come up from your lens when working the divestiture side? Obviously there's a component around communications.

Yeah, thanks for reminding. So as part of, you know, as I work with the business team, the shared services, we're working on the transition services agreement, the purchase agreement. Along at that same time too is the communications plan. It's really partnering with the buyer. What's the employee con plan, what's the customer con plan? So that's all happening. Our corporate team is phenomenal, but then they partner with the business, HR and business leaders and get it all set. So come day one, which is close date, or maybe it's the day after, in some cases, they go through this laundry list, this whole communications package. So that all happens. Everybody's happy with their new home. Buyer leadership is given their spiel and for the most part the business team, if they weren't part of the transaction, they're just gonna go continue on and do their day to day job. Any of the lawyers and all the consultants, they're all done. Money's in the bank. Great, we're done. So deal signed then. That's where my work starts. So I manage the oversight of the execution of the TSAs. And so sometimes for like I said, 30, 60, 90 days, there really isn't much for our team to do. They just keep the lights on, keep everything going. But in the meantime, we have to be pushing the buyer to get their migration plans and to tell us what they need. And that piece of it that transition services execution can go on for months and years. I do want to make one comment that I think I forgot to mention about the business team is that I think I did say that many of them have never been through a divestiture before. So there's that educational component that Biz Dev really needs to make sure that we have a process in place and educates them. But they have day to day jobs. They have to keep running the business that we're selling. I mean they still need to keep generating revenue and doing everything they did prior to us deciding that we're going to divest. And it can be challenging for them because deals can be demanding. We can have short timelines, we can be throwing a lot of requests at one or two people because we've got this small team. So it really puts a lot of burden on them to compile this information, to gather it, to get to the right people that they can get to. They might be like, oh, this person over here is the one who's going to have this answer and if I can't bring them under the tent, how am I going to get this information? So sometimes we have to be creative on how we approach to get it, but sometimes we have to make assumptions.

This is a great point. When looking at the organizational structure, it sounds like you have a core team that sort of owns the management of the divestiture. But then like you alluded to that essentially you're using a lot of in house resources with folks that are running operationally these different functions and utilizing them to do this preparation. Yeah, which I can imagine isn't the most exciting thing that they want to work on.

Oh, exactly. Because of course they're thinking I got to keep my numbers up. Especially if we're preparing to put it on the market. So some of this work, it depends on what approach we're taking. If it's a banker driven auction process or if it's a one on one, the dynamics can be different. So there might be a lot of work that has to be done before we even announce that we're going to, that we want to sell it. And so that can really take time away from the business maintain or managing the business.

That's trouble. Because if they get distracted, business performance can tinker. What's worse, the distraction of prepping a business or business line for sale or that confirmatory diligence period.

Since I've never been in a business, I can't speak to that, all I can say is I've been very fortunate that my business teams that I've worked with have all been very cooperative. In fact, we just closed a deal on June 1 and the business team just really did a fabulous job. And that's been my experience. And they want the business to succeed, especially if they're part of the deal, then they really, then they really want to make sure it's successful. We've had a couple of deals where early on we had the management team working on the transaction and they were actually part of the asset that to be sold. And it was interesting because initially it's, they're putting together all the materials to say, look at our business, this is great. Then once you start having conversations with the buyer and you know who it's going to be, they start getting a little bit buddy buddy with them and loyalty shift so that all of a sudden it's like, oh, well, now this is who I really want to impress is this buyer. Maybe I'm not going to represent Thompson Reuters as much as I should because now I'm focused elsewhere. And so that's where we learned that we have to, if we have people that are part of the asset, that we have to make sure that we've got Thomson Reuters representation on those who are staying. So we can make sure that, hey, we're not doing something we shouldn't be. We're not promising something that we can't deliver. So we really, we learned early on that we have to make sure that we have governance on the Thompson writers side. That's, that's going to be post sale. It's still going to be us after the close.

That's a really good point. What are other big challenges you face during a divestiture? Is it people side, process side? What's the hardest part?

Yeah, as I said, the people side of it. And it's only because a lot of times we're limited to who we can bring into the process. That's always a challenge. There's difficult people and for the most part I've been lucky. I've been lucky. Sometimes there can be external counsel or someone that just kind of has maybe some unrealistic expectations about what should be happening. And so they might be asking for things that it's just not reasonable or realistic and they might just dig their heels into it and it's just no matter. You can explain it three different ways and they still are just not listening. They keep asking to get a different answer and it's just Sometimes you just can't do it. But it's really, I think, just not being able to bring the people under the tent, that's, I think, really one of the biggest challenges.

Looking back, what would you say are some of the biggest lessons learned purely from doing the volume of divestitures you have? I'm particularly curious if you have examples of some gotcha moments that you've maybe learned something interesting from.

As I said, that first deal we did when the employees were no longer in Thomson Reuters payroll, that was a big aha. Like I said, we ended up getting a solution that worked. The recent deal that I mentioned about really not having a good idea what was in the components of the product, really not knowing that we had licenses and homegrown and different components that all were conglomerate together, and not being able to have had a good presentation for the buyer. We worked through it with them, and that I think that made us look bad. I mean, it all worked out. It was fine. But it's really. And I know, like, every seminar will say, know what you're selling. Know what you're selling. Define, clearly define the assets you know, but it's true. It's true. Because in that case, it could have been worse than it was. Like I said, it worked out. And then, ironically, with our employee access issue, something happened with this deal that we just closed that I literally have had I don't know how many emails on it over the past day. And. And so we need to do a little debrief on what happened, because I hear it assured the business, I assured the buyer. Oh, no problem. We have a process in place. Come day one, everything you'll have, the access you need, no problems. The exact opposite happened. Best laid plans. You think you've got a process in place and something happens. No, every deal is different, and there may just be some little nuance that may never happen again. But I try to do debriefs with the team for most of the deals, if not all, even if it's just a simple send them a little survey saying what worked, what didn't, what could we do better, and then try to write it up if I can.

The learning just continues, deal after deal, regardless of how many you do.

It's true. It's true. I feel very confident that if something new comes about, it's okay. We've adapted so many times. I think it could get a little unnerving if you're new to it because you don't know what you don't know. When we first started with Our process, like I said, we started with what we were doing with acquisitions and then said, this is similar, but different. But we have to realize that we don't know what we don't know. So let's move forward and just try to peel back the layers and figure out what we've got here, and then we'll figure out what we're going to do with it and what the buyer needs. And you just try to match those two together.

The best way to look at it.

You have to be open for change, and you have to be able to have crazy hours, but then you take advantage of the lulls. And back in the day, we were doing, I think I had, like, a dozen deals on my plate at one point. And granted, they're in different stages. You have to be able to, like, go from one to another in the same day, and they could be drastically different businesses. When we first started, too, I think I mentioned that we had a dedicated M and A team. So that makes it easy when you got expertise in multiple functional areas. I know a little about a lot of the areas, but I don't have that expertise in HR or in billing. And so that's where you just have to know who to pull in. That makes my job a lot easier when I have expertise within the company.

Rhonda, what's the craziest thing you've seen in M and A?

I know you're going to ask that, and you've asked that to other people. You know, I think on an acquisition side, you probably get something more interesting and crazy. But I was trying to think about this, and, yeah, divestitures are boring, but it's the least glamorous job you're going to have because you're selling something, not acquiring it. Getting all excited about, ooh, new sales. You're like, we have to get rid of this business, and there's reasons behind it. And then when you have to work in a tsa, I don't know how many times I've had to say to people, because they'll come to me and say, why are we doing this? We don't even own this company or we own this product anymore. And I say, because we're legally obligated under the Transition Services Agreement, it's kind of like, leave it at that and do it. Yeah, I don't think anything too exciting or crazy. Unfortunately, now I'm going to be looking for something crazy to happen.

Yeah, there's obviously a lot, but no, you got a good point that I think a lot of People don't understand divestitures for what it is. We unpacked a good amount, gave our listeners a better insight on that. But also the good point of the TSAs, they're legally binding and you gotta follow through on them even when they may not seem to make sense.

So hopefully I covered what you wanted. I could go on and on about all my stuff. I can ramble. I shouldn't have said it's boring. I think least glamorous role is probably the better way to put it. But it's fun. As like nerdy as that may sound, it's fun to have all that difference. I relish change and challenge to try to problem solve some new issue. It's exciting work if that's the type of person you are. I mean, like my husband's a stereotypical accountant and I tell him there's no way he could do my job for a day or a week because there's just too much. Schedules are constantly changing. Things are coming out of the woodwork. It's not routine. It's never routine. Which is why I like it.

You gotta be flexible, responsive and adaptive. And problem solved.

Exactly. Well said.

Rhonda. Thank you so much for your time today. Enjoyed this conversation and learned a lot.

Thank you so much. I really appreciate the opportunity. It was just fun. It was fun talking. I look forward to the next project.

You got the knowledge, you should keep doing it. So yeah, absolutely.

Thank you. I appreciate the vote of confidence.

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