Baker McKenzie M&A Partner, Darcy Down, was a featured legal authority in the Harvard Business Review briefing paper, "Solving the Integration Challenges Surrounding Carve-Out Transactions."
Given current economic factors and the increased pressure to maximize shareholder value, carve-out transactions have become highly attractive with activity having increased threefold over the past decade. Carve-outs are widely considered the most complex of mergers and acquisitions operations, but thorough advance planning can ensure a successful transaction and post-acquisition integration process.
In the paper, Darcy notes that if buyers fail to plan for integration following a carve-out transaction, they will need to find post-deal workarounds for all types of operational challenges, which tend to be costly and can come with risks. "Most of the issues that I see when there is a failure to plan ahead are resolved with arrangements that haven’t been fully thought through, and can have negative financial, accounting, tax, or operational implications, which cost time and money to fix and can be value destructive,” she says.
Darcy emphasizes that transitional service agreements (TSA) are a critical tool for carve-out transactions and that having a well-crafted TSA prepared far in advance of the deal closing helps avoid a myriad of post-acquisition challenges ranging from IT infrastructure and data migration issues to delays with payroll and benefits.
Additionally, she explains that the "The savviest buyers leverage due diligence for integration, because during the diligence phase of the deal, you want to ensure that the synergies sought, and their integration goals, are realistic.”
Read the full report here: https://hbr.org/resources/pdfs/comm/tmfgroup/SolvingTheIntegrationChallengesSurroundingCarve-OutTransactions.pdf