What path will you navigate to carve-out sale success?

Road map to carve-out sale success

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Getting the deal signed in six months

Successful sellers understand that carving out a business is often more complex than acquiring one. Selling a carve-out requires a greater level of planning, effort and urgency. But, thinking like a buyer helps you control and expedite the process.

Road map to getting the deal signed: part 1

EY - Carve-out road map timeline

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  • Governance
    • Establish a divestiture governance model to help mitigate divestiture risks – it helps manage key deadlines, interdependencies, resource constraints, decision making and stakeholder expectations.
    • An executive steering committee, functional separation leaders and an internal and external communication strategy help define roles and responsibilities and facilitate execution.
  • Tax
    • Determine which entities will be sold as stock vs. assets and calculate tax gain or loss.
    • Consider a legal entity structure that can help maximize value to a buyer and reduce tax on sale and repatriation of proceeds.
    • Anticipate whether a tax provision for full financial statements will be needed.
  • Carve-out financial statements
    • Define perimeter of the business and identify components that may later be included or excluded.
    • Consider financial statement alternatives (full, abbreviated or deal-basis and audit requirement).
    • Accumulate and aggregate data (financial reporting model).
  • Deal-basis information
    • Develop value story and tailored materials and prepare for buyers.
    • Compile deal-basis information and normalized EBITDA, as buyers generally index purchase price on an EBITDA multiple.
    • Develop forecast and value drivers – linking historical with projected results improves credibility.
  • Operational separation
    • Define current-state operating model in order to avoid surprises that could decrease deal value or delay closing.
    • Assess time required to establish new legal entities – requirements to establish new legal entities vary by jurisdiction and industry and can take over a year to complete.
    • Define the future operating model for the business and related separation strategy.
    • Determine IT requirements to operationalize new legal entities, segregate access and data, address name changes and enable separate financial reporting.
    • Scale organization size and establish process to transfer employees.
    • Define TSA requirements and service delivery model in order to help buyers understand complexity and cost to operate on Day 1 and to exit TSAs.
    • Initiate separation planning and begin mobilizing resources – planning early can shorten this timeframe and help reduce the need for TSAs.