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
- 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: