Divestiture Advisory That Cuts Transitional Service Costs by 27% in the UK

Divestiture Advisory Services

In today’s dynamic corporate environment, companies in the United Kingdom are increasingly seeking ways to streamline operations, maximise value and reduce unnecessary expenditure when divesting non-core assets. Divestiture consultants play a pivotal role in this transformation, helping organisations manage complex separation processes while driving down costs, especially transitional service expenses. Transitional service agreements, or TSAs, though essential for operational continuity between a seller and buyer, often represent a significant post-deal cost burden. This article explores how expert divestiture advisory can cut transitional service costs by up to 27 percent in the UK and provides the latest data and industry trends shaping 2025’s divestiture landscape.

Understanding Divestitures and Transitional Service Costs

A divestiture occurs when a company sheds assets or business units to focus on core competencies or raise capital. As companies restructure portfolios, divestiture consultants guide the strategy, planning, execution and post-transaction activities necessary to ensure value is realised rather than eroded.

One of the most persistent challenges in divestitures is managing transitional service agreements. These contracts ensure the divested business continues to receive essential services, such as finance, IT, HR and supply chain support, from the parent company for a defined period. Though TSAs are critical to operational continuity, they can also drive up costs and complexity if not carefully managed. Industry research shows these costs can be particularly heavy when poorly scoped or executed without expert oversight.

The Cost of Inefficient Transitional Services

Without expert divestiture advisory, transitional service costs can escalate, absorbing margins and eroding deal value. Studies indicate that separation costs, including transitional services, can account for between 1 percent and 5 percent of the revenue of the divested business, and in complex carve-outs, these costs may reach as high as 13 percent.

In 2025, the UK M&A market will remain resilient despite market headwinds. In the first half of 2025, total UK M&A deal value reached £57.3 billion, though deal volume softened compared to previous years. Meanwhile, data from the Office for National Statistics shows steady quarterly merger and acquisition activity throughout 2025, indicating ongoing corporate restructuring and divestiture activity across sectors.

These figures underscore the scale of transactional activity in the UK and the potential impact that even modest efficiency improvements, such as a 27 percent reduction in transitional service costs, can have on total deal economics.

How Expert Divestiture Advisory Reduces Costs

Divestiture consultants bring specialised skills and methodologies that significantly lower transitional service costs. Through a combination of strategic planning, operational readiness and execution excellence, advisory teams help sellers reduce overhead, optimize resource allocation and accelerate separations with precision. Key strategies include:

1. Defining Clear Service Scope and Requirements

One of the most effective ways to reduce transitional costs is to precisely define what services are essential for the post-deal period. Advisors support companies in conducting detailed service scoping exercises to eliminate redundancies and focus on what truly matters for business continuity. This prevents excessive service obligations that inflate costs without adding value.

2. Early Engagement and Planning

Engaging early with stakeholders including IT, HR and finance teams allows divestiture advisory professionals to map dependencies and anticipate challenges before they become costly issues. This reduces delays and prevents protracted service delivery periods that typically increase total transitional expenditure.

3. Leveraging Technology and Automation

Advanced analytics, process automation and AI-driven tools are increasingly used in 2025 to streamline transition planning and execution. Research indicates that over 60 percent of UK dealmakers now use AI for target screening, valuation modelling and integration planning, helping to reduce timelines and improve cost forecasting accuracy. These capabilities complement the work of human advisers, ensuring both speed and accuracy.

4. Vendor and Supplier Contract Management

Efficient management of supplier contracts and third-party engagements can prevent costly service overlaps or lapses. By renegotiating terms, aligning contract end dates with divestiture close dates and consolidating services, divestiture consultants help trim unnecessary liabilities that would otherwise extend transitional service obligations.

Quantifying the Savings: A 27 Percent Reduction in Transitional Service Costs

Achieving a 27 percent reduction in transitional services costs is not hypothetical. It reflects best practice outcomes when companies utilise seasoned advisory expertise. This reduction is realised through tighter service definitions, elimination of unnecessary service obligations, accelerated separation timelines and improved contract governance.

To put this into perspective, if a divestiture incurs transitional services costs equating to 4 percent of the divested business’s revenue, a 27 percent reduction reduces this to approximately 2.92 percent. For a divested unit with annual revenue of £100 million, this translates to cost savings of around £1.08 million per year. Over the life of a typical 18-month TSA, the cumulative savings exceed £1.6 million.

Such quantifiable savings can materially improve return on investment for sellers and strengthen negotiating positions in competitive deal environments.

The Strategic Importance of Divestiture Advisory in 2025

In the broader context of UK corporate strategy, advisory services are increasingly recognised as essential rather than optional. The divestiture advisory market globally is projected to grow to approximately $4.9 billion in 2025, reflecting rising demand for specialised advisory across consulting, legal, operational and financial domains.

Companies that invest in professional divestiture advisory benefit from:

Improved Deal Certainty

Advisors help identify and mitigate risks early in the process, increasing the likelihood that deals close on time and within budget.

Enhanced Operational Readiness

Planning for Day One operations of the divested entity ensures continuity, reduces disruption and maintains stakeholder confidence.

Maximised Financial Outcomes

Identifying stranded costs, optimising resource allocation and reducing unnecessary expenditures result in a higher net return from the divestiture.

Better Stakeholder Communication

Clear communication frameworks help align internal teams, investors and buyers around separation objectives, reducing uncertainty and resistance.

Case Trends in the UK Market

While broader M&A activity in the UK has fluctuated in 2025, divestiture activity has remained a core part of strategic corporate repositioning. Companies are refining portfolios to focus on growth priorities and capitalise on shifting market dynamics. For example, robust inward investment flows into UK companies continue despite macroeconomic uncertainty, showing sustained confidence in British assets.

Amid this backdrop, divestiture advisory is central to successful value extraction and transformation, with costs and execution precision at the heart of competitive advantage.

As the UK corporate landscape continues to evolve through complex transactions and portfolio reshaping in 2025, the role of divestiture consultants has never been more significant. By implementing structured methodologies, leveraging technology and ensuring disciplined execution, advisory experts help organisations achieve measurable cost reductions, including cutting transitional service costs by up to 27 percent.

Investing in professional divestiture advisory not only drives immediate savings but also enhances long-term strategic outcomes, enabling companies to refocus on core operations, reinvest in growth opportunities and deliver sustainable shareholder value. For companies navigating divestitures today, partnering with seasoned consultants is essential to realise both financial and operational success in a competitive market.