Divestiture & Separation
Companies sometimes choose to realign their business models and carve out divisions, subsidiaries or specific business operations, a strategy every bit as important as M&A. The carve-out organization is to exist as an independent and viable company which can then be sold and integrated into another company or exist as an independent stand-alone entity. We can provide support throughout the divestiture process in working with our clients to develop carve-out plans to execute a timely separation of the divested business.
Challenges for the divestiture of the designated carve-out can occur especially in the context of shared services and gateway functions, such as information technology and human resources. Unfortunately, these issues often receive inappropriate attention compared to their complexity and importance for the remaining as well as the newly established parts of the company.
It is important to identify the areas that need the most attention before a carve-out can be fully initiated and the parties move to the next phase. Below are a few of the focus areas:
Executive management needs to identify the individual in authority and the support staff that will handle or run the carve-out process. If there is no suitable person internally who is capable of managing this process, then consider employing additional resources to make it work.
It’s a fact that staff reductions often come with the territory when it comes to M&A, carve-outs, and divestitures. We work with our clients to not let employment issues and mishaps cause a delay in the operations of the carved-out unit once the decision is made to move in that direction.
IT will play a very important role in the carve-out, so the IT infrastructure and application systems that are in place have to be analyzed. Likewise, modifications to the communications systems must be identified, with the necessary changes put in place.
Changes to the accounting and payroll systems must be noted, with actions plan implemented for the carve-out organization. It must be clarified whether the accounting software or program is part of the carve-out deal, or if an accounting team needs to set up new systems.