Capturing value through carve-outs
Buyers beware: Six common and
Buyers need to plan early on and carefully to ensure the acquired assets are ready for full operation.
- Buyers often underestimate up-front and ongoing costs. Instead, buyers should start early in understanding "what's in and what's out," the tasks that need to be performed to successfully transfer assets at close and any service gaps that may exist post-close.
- Relying too much on the seller in TSA discussions conveys advantage to the seller. Buyers need to devote their own resources to gathering information relevant to the negotiation of TSAs.
- Improper planning for legal entity establishment can be crippling. The tasks needed to make legal entities operational – i.e., obtaining regulatory approvals or re-establishing licenses – can involve long lead times.Inadequate planning for such tasks may lead to costly workarounds at close, or, worse yet, a delay in the close.
- Lack of involvement in the carve-out pre-close can lead to misunderstanding and delay. Buyers need to have transparency into the progress sellers are making in carving out the target. Moreover, buyers need to define for sellers their post-close operational requirements to receive the assets.
- Inadequate attention paid to day one operation can potentially result in significant increases in operational costs and potential loss of top line revenue. Buyers need to plan early on and carefully to ensure the acquired assets are ready for full operation, and the expected full suite of products are ready for sale, immediately following the transaction close.
- Lack of a defined transition governance structure can lead to a loss of control and a failure to achieve objectives. Corporate strategic and financial buyers alike need to assign accountability to ensure that pre- and post- close tasks are properly performed.
Capturing value through
On April 14th, Ernst & Young LLP and a panel of external professionals discussed eight important tactics to enhance carve-out success. Watch the archived webcast.