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Capturing value through carve-outs - Eight winning tactics buyers and sellers can use now - EY - Global

Capturing value through carve-outs

Eight winning tactics buyers and sellers can use now

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Summary: Resurgence in the global economy tends to accelerate the pace of M&A. In this environment, carve-outs are emerging as an attractive option for both sellers and buyers in terms of raising and investing capital.

However, before proceeding with a carve-out, executives should closely familiarize themselves with all of the potential sources of value and risk.

Initial considerations

Counterparties to any deal have both complementary but potentially conflicting priorities.

Through a stronger understanding of the objectives of their counterparties, buyers and sellers can generally improve the value of their opportunities.

However, the complexity of a carve-out presents an array of challenges. Recognizing the needs of the buyer, a seller must be transparent about costs, prepare thorough and accurate carve-out financial statements and provide sufficient and appropriate information.

Buyers face a different set of challenges

These include:

  • Valuing the assets
  • Performing due diligence on the seller's financial statements
  • Maintaining and continuously updating their own deal analyses

A buyer must also prepare for day one and overall integration, which will likely entail negotiation with the seller for a short-term Transition Service Agreement (TSA).

Further, there are many issues - both significant and subtle - that can surface without notice.

But by reviewing any transaction from the perspective of both buyer and seller, executives can avoid surprises, gain a clearer understanding of where value can be created and, by following through, make a good deal even better.

In this report, we lay out specific tactics that buyers and sellers alike can use to achieve their goals:



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