WEBVTT

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Carve-outs offer private equity
investors a chance to acquire

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neglected corporate assets.

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These can be corporate divisions
that are underfunded, trapped in

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the wrong structures, or simply
lack management focus or

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sometimes the right incentives.

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And as a result, these former
non-core assets often provide

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significant value creation
opportunities.

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We see increasingly strong
demand from private equity

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players for such deals.

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At the same time, these deals
are often quite complex, as

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private equity firms face
certain challenges and

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constraints when dealing with
carve-outs.

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To start with, private equity
buyers typically do not already

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have the infrastructure in place
to integrate the carve-out

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asset,

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so they basically need to create
a new company from scratch and

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have to collaborate with a
seller to make sure that this

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new business will work on day
one.

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This involves substantial use of
transitional service agreements,

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so-called TSAs.

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Second, private equity investors
have high-value creation targets

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embodied in their investment
case with only five to seven

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years max to reach them.

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So they basically need to
separate and optimize in

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parallel.

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This means using the
transitional service period of

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16 to 18 months while the
carve-out is still operating as

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the old company to stand up the
new systems, the infrastructure,

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and support the full potential.

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Doing a transformation in
parallel to separation is tough

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and there's still a business
that you need to run and grow at

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the same time.

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But doing this and pushing it
into the period of the

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transitional services is the
number one lever that private

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equity buyers can use to create
value from carve-out.