WEBVTT

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When a company decides to carve
out and divest part of its

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business, there's often huge
value at stake.

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Capturing that value takes not
only thorough preparation and

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management of the deal process,
but also strong execution of the

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carve-out itself.

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Let's think about three ways to
get the basics right in

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carve-outs.

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Firstly, a great carve-out
process analyzes important

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strategic questions and uses
that analysis to provide timely

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and accurate information to the
deal team.

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Often the carve-out team will
work with the deal team to

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clarify the exact perimeter of
the transaction.

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In other words, which assets and
liabilities will be included or

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excluded from the carve-out.

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Also, the carve-out team will
frequently define a lean future

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operating model for the
carve-out to become a standalone

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business.

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By clearly outlining how to
separate the carve-out and

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transform it to this leaner end
state, we can help pave the way

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for a higher valuation.

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Secondly, to understand value
creation from a divestiture, you

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need to assess the long-term
strategic, operational and

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financial implications of the
carve-out on the parent company.

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One of the biggest issues to
consider is stranded costs.

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In one recent case, we worked
with a large chemicals company

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to implement stranded cost
reduction measures in parallel

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with the deal process.

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By doing so, we help the client
enable the rapid mitigation of

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hundreds of millions of dollars
in stranded costs.

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Finally, a good carve-out
process seeks to minimize any

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loss of business momentum while
the deal unfolds.

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There are a number of risks to
watch out for here.

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For instance, companies may see
productivity drop as staff get

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distracted by how the carve-out
affects them personally, rather

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than focusing on the work at
hand.

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Sometimes the uncertainty
surrounding a carve-out can lead

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to higher staff turnover.

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Other times you can see a loss
of sales as customers adopt a

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wait and see attitude.

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All of these factors need to be
anticipated and managed

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appropriately in a carve-out
program.

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The overarching message is this:
don't treat carve-out work as

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some sort of mechanical
separation exercise.

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Instead, recognize that
carve-outs offer an opportunity

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to create and protect value.

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This recognition is an important
first step on the road to

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carve-out success.