Can you sell part of a business?


Spinning off non-core or non-performing divisions is a common enough business practice. In this post, I discuss how to manage the operational and legal implications of divesting, as well as consider how to position yourself so you get the best asking price. Let’s look at the advantages and disadvantages of selling part of your business.



What are the benefits of divesting business units?

Why would you sell part of your business?


Divesting business units can be advantageous:

  • Potentially grow your profits

  • Increase the company’s market valuation

  • Receive financial remuneration through asset liquidation

  • Free up resources to focus on more profitable business divisions

  • Provide a growth opportunity for the remaining business

  • While retaining control of the remaining portion of the business

Divesting a business also has its disadvantages as you may be forced to:

  • Execute mass layoffs and

  • Force some employees into early retirement

Can you sell a business without the name?

Yes, and this is typically easier in the cases where each business division exists as a separate entity. If your company has two units, a deal can be structured to divest either one without the need to use the business name of the other.


Can you sell a business without a lease?

Many businesses today, especially those in retail, tend to have both a physical and an online presence. These are often taken as two divisions. Should a retailer decide that they no longer wish to retain the online division, they can sell it off. The online business is an entity without a lease in the traditional sense. This would also be true if the business was operating a drop shipping model. So, you can sell a business without a lease.


Regarding the operational and legal implications of selling a part of your business, here’s what you need to know:

  • Divestiture operation and legal implications

  • Before considering the legal framework, we must start with the operational element.

Operation implications

Is it operationally feasible to divide the business? If the business is one entity, start making attempts to separate divisions and grow each unit to be as independent as possible. The process may look like this:

  • Separating profit and loss statements

  • Having different websites for each division

  • Having different contact details for each unit

  • Having different staff to run each division

Doing this gives the buyer a good idea of what to expect during integration, conducting the business valuation will be less challenging and approaching third-party financers will be easier.


Legal implications

Your options for deal structures will either be an asset or stock sale. The structure pursued will depend on the following considerations:

  • Is your business viewed as a single entity? If yes, then the only viable deal will be an asset sale. An asset sale is when the buyer acquires the individual assets via a Definitive Purchase Agreement (DPA), also known as an Asset Purchase Agreement (ASA).

  • Is each business division a separate entity? If yes, then you have the freedom to pursue either an asset or stock sale. A stock sale is when the shares belonging to the division are sold to the buyer.

Positioning yourself to sell

You do not have to wait until you’re ready to retire or exit to cash out. By strategically selling non-core divisions of your enterprise, you can, in theory, start taking some money off the table. If you are thinking of divestiture, a wise first step is to have a seasoned M&A broker assess your business and give you professional advice on the best way forward. Contact me today to discuss your options for selling your business.


Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.

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