Capturing value through carve-outs
Sellers beware: Six common mistakes
Sellers should consider the potential buyer pool before deciding on the form and structure of the transaction.
- Weak executive leadership during any transaction leads to missed deadlines, oversights and errors – all of which will be apparent to the buyer pool and result in value erosion.
- Inadequate resources, either in number or skills, will impact the timeline. A CFO recently lamented that he was being asked to close the books in November, do the year-end closing in December, complete an ERP implementation and, in his spare time, develop a carve-out financial statement and start sell-side due diligence.
- Weak coordination or governance policies will cause unnecessary roadblocks and frustration. Each deal needs a dedicated steering committee with sufficient support to be able to drive functional teams to develop aggressive, yet achievable timelines and efficient functional work streams.
- A failure to anticipate would-be buyers' needs can create many last minute requirements that can frustrate and potentially burn out the transition team.
- Insufficient or incomplete thought as to the form of the transaction can potentially result in transferring control of certain key components of the negotiations to the buyer or unnecessary tax leakage. Sellers should consider the potential buyer pool before deciding on the form and structure of the transaction.
- Failure to properly consider the buyers' day one functionality requirements could result in significant money being left on the table. Sellers too often focus on their own separation issues and not enough on delivering a stand-alone, ready-to-run business.
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