Navigate Your Organization Through a Carve-Out
Plan and Execute a Successful Carve-Out
Spinning off or selling a business unit, product, or service line can provide cash, improve earnings stability, and increase your focus on key assets. Short- and long-term success hinge on understanding the desired future-state relationship between the separate entities and any ongoing involvement in the carved-out subsidiary’s future operations. Developing clear transition service agreements over shared resources helps decrease complexity.
Our team of experts authored a comprehensive 8-step guide to executing a successful carve-out. Topics include:
- Divestiture Strategy
- Common complications to consider (ranging from conflicting visions to financial statements)
- How to survive a carve-out
- Moving from strategy to execution
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COMMON CARVE-OUT CHALLENGES
Post-transaction, different parties will be vying to achieve their individual objectives. By clearly defining the transaction vision and structure, any ambiguity can quickly be cleared to secure an optimal result.
Following years of ERP efforts, companies are more interconnected than ever. The interrelated activities blur the performance of individual entities potentially impacting the profitability determination and more importantly profit sustainability. In addition to impacts on profitability, process and systems should be considered.
Due to the time commitment related to carve-outs, in addition to the company-wide dedication required for a smooth transaction, the normal day-to-day operation of the business may be negatively impacted. Staffing appropriately will help each business maintain focus on its routine activities.
Deal Financial Statements
Sellers should use a model to aggregate historical data, prepare financial statements, and facilitate diligence & potentially an audit. Direct and indirect costs must be reflected in the historical carve-out financials. The deal terms do not dictate accounting treatment. Insufficient planning and preparation can lead
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The key is to not go at it alone. From pre- to post-deal and buy-side and sell-side carve-outs, MorganFranklin partners with stakeholders to overcome challenges and maximize the value of the transaction.