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Overview
Our services and team of carve-out specialists are geared to making sure our clients’ separation processes are as smooth and value-enhancing as possible. We understand the practicalities, challenges and potential risks of both the technical preparation of carved-out financial statements as well as the operational implementation.
Despite carve-out transactions by their nature being more complex to implement, this type of transactions is a growing feature in the current deal market.
Issues you may be facing
Our experience has taught us that a successful carve-out depends on the following critical matters:
- An integrated approach to the financial, operational and legal aspects of the transaction.
- Having well defined guiding principles with an appropriate governance structure.
- Being explicitly clear about the transaction perimeter “What’s in vs. What’s out.”
- A clear target operating model, including challenging the standalone view and viability of the remaining business.
- Understanding the cost impact of the separation.
- Robust separation planning, for Day 1 and to fully standalone.
- Well defined and transparent transitional support requirements.
- Putting employee matters at the heart of all that you do and plan.
- Informed and coherent communication both internally and externally.
How we can help you
- Financial carve-outs
- Managing the separation to maximise deal value
Financial carve-outs
A key component of any divestiture is the preparation of the financial information of the carved-out business. Deal basis financial statements should reflect the business operations being divested, which may be different than the historical reported operations of the carve-out entity. These statements should reflect the historical operations of the carve-out business and all related costs of doing business as if the carve-out business has always operated on a stand-alone basis.
The preparation of carve-out financial statements is one of the most complex issues in the execution of a divestiture as there is limited guidance covering their composition, in particular when it comes to the treatment of shared, assets, shared resources, required stand-alone adjustments and the resultant impact on the remaining business.
As a result, the preparation of carve-out financial statements requires special attention to ensure that all of the assets and liabilities of the separate business have been properly identified, and that all relevant costs of doing business have been reflected in the carve-out financial statements.
Understanding the ins and outs of divestitures, and the potential impact to both buyers and sellers, will pave the road to a successful transaction and the realization of deal value.
Using our extensive deal experience supported by our Technical Accounting and Tax subject matter experts, we will guide you through the intricacies of preparing carve-out financial statements.
Managing the separation to maximise deal value
The interconnectedness of businesses, products and enabling functions within a company create challenges when attempting to separate a business being carved-out while moving at the pace of deal making.
How do you disentangle the underlying infrastructure, intellectual property, and shared commercial arrangements? How do you separate shared fixed assets, resources and contracts? How will the carve-out business operate as a standalone business? How do you reorganise your remaining business? How do you engage key stakeholders?
We understand both vendor and buyer perspectives and their impact on the value of the deal.
If you’re a vendor, we can help you to assess the costs of the carved-out business and the transitional support required, also the implications thereof on the expected returns from the deal. We can also help you to anticipate bidder requirements, which can accelerate the deal process and maximise the proceeds. We ensure separation plans can be delivered, that business disruption is minimised and that there is an appropriate and executable level of support during the transition.
If you’re an acquirer, we can help evaluate and challenge the cost base and effectiveness of the transition plans and improve operational efficiency, both during the transition and as a standalone business. We will work alongside you to implement these plans effectively.
Our flexible and rigorous carve-out approach focuses on what really matters:
- Understanding the touchpoints of the carved-out business with the broader organisation and / or Group.
- Developing a fit for purpose, cost efficient, standalone operating model;
- Preparing robust and executable separation plans across all functional areas of the business; and
- Defining flexible transitional arrangements to ensure the business can operate from Day 1.
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