30 January 2017

The Art of the Modern Carve-Out

You are in good company if you are considering a carve-out. Carve-outs can unlock value from non-core enterprises, and they can be a creative approach for buyers to build a portfolio or to pick up specific assets.

Your biggest concern as a seller will be how you can get the best possible price and deal certainty.

As a buyer, it will be how to both avoid overpaying and avoid taking on lots of unknown risk.

We have worked on many carve-out deals, including some of the biggest in the market. This has enabled us to develop unique strategies to help clients navigate the complexity of these transactions and realise real value. 


 

If you don’t get it right, value can leak

Done well, these deals can generate a lot of value. But they are complex. There are many pitfalls, especially when the transaction involves businesses that operate in several countries.

The way the deal is executed impacts directly on the value. Whichever side you are on, experience tells us there are steps you can take to create the right circumstances for success:

  1. Sellers, think like your buyer - Although you may not see a future for a particular asset in your company, to generate serious buyer interest and the highest price, you need to identify how other owners may value it differently.
  2. Buyers, focus on what you want and protect it - As a prospective buyer, you will probably know the price you are willing to pay for the asset, as well as your objectives for the deal. However, you may not have included other factors that could affect the price.
  3. Design a deal structure - There is always an acquisition structure that suits both the buyer and seller. The ideal structure will maximise the value for you and the other party, whether you are the buyer or seller. It will also minimise business disruption through the separation process.
  4. Focus on the details with a team that knows the local market - Whether you are the buyer or seller, unforeseen delays will be costly. Small, local issues can turn out to be material to the deal, or they can change the structure of the transaction.
  5. Plan your HR strategy - HR should be strategic, not tactical. HR issues are sometimes left until the implementation stage, rather than addressed when the deal team plans its strategy.
  6. Put everything together - You want to get the best price for your assets. It’s important to you that your buyer and other stakeholders are confident in the process and not surprised as the transaction progresses. Good planning is key to creating this confidence.

>>Download The Art of the Modern Carve-Out

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