Hi Anonymous,

in assessing whether a divestiture of a particular business line makes sense, there are a couple of different angles you might want to consider:

• Profits: you should first check whether the business line generates profits, and what the outlook to the future is (will it generate profits going forward?).
• Profitability: Not to be consfused with profits - how much profit is generated relative to resources spent (i.e., profits over cost)? Thereby, you check whether there are better options for utilizing resources (e.g., other lines of business that could be expanded)
• Cannibalization: Even if profits and profitablity look good, cannibalization could eat into other areas of business. So this should also be checked.
• Natural ownership: there might be other companies that, due to their particular asset base or footprint, can extract more value out of your business line. In that case it might be worthwhile to sell off this particular line of business for a price that exceeds expected profits over your target time horizon.

All of these aspects should be succinctly outlined and then assessed (either all of them one by one (in order of priority according to your hypothesis), or following guidance by the interviewer).

Hope this is helpful!

Cheers,

Sidi