Our recent work in carving out a successful company from its parent group to establish a new standalone group entity under Private Equity ownership provided further evidence of three critical success factors in executing a deal of this kind:
Irrespective of the allocated timeframes to close out a carve-out, meticulous preparation is vital, in order to ensure that Day 1 truly represents an exciting new dawn rather than an uneasy feeling of being cut adrift from previous support systems.
For the buying company, rigorous interrogation of the deal perimeter will reveal the true picture of people, products, systems, and customers. This information must be used to validate and advance any value creation thesis, and help establish a target operating model that will be put to immediate use post-close.
In a fast-moving deal environment, carve-outs are simply unable to achieve perfection in their execution. The pursuit of such an ideal is probably more likely to derail deal progression.
With robust preparation completed, a picture should quickly be built of the most critical – and complex – areas of a deal that simply must be resolved before Day 1. This could be IT disentanglement, legal/multi-jurisdictional requirements, or simply securing the right resources – skills and sheer numbers – to hit the ground running after closing.
“Nice-to-haves” certainly shouldn’t be cast aside altogether, but when the pressure of time ramps up, carve-out teams need to have a laser focus on what really matters at any given point in time.
This particular engagement presented us with less than two months between the signing and closing of the transaction. Again, the mantra of an imperfect plan executed at pace trumping a perfect one on paper couldn’t have been more apt.
Even if the challenge ahead is clear, the speed to deliver can only be maintained with clear roles and responsibilities within the PMO and across the impacted business functions. Constant communication is key, and deal value can be lost either side of closing without maintaining a relentless pace to execute, implement, and ultimately turn attentions to value creation and growth as quickly as possible.