Everything you need to know for a successful Carve-Out!
Publié le 03 Jun 2021

Everything you need to know for a successful Carve-Out!

Running a business is not an easy job. It requires processionals with financial and project management skills to deal with all the situations involved in running a business. You may need to implement new strategies to stay productive or redesign your organization to innovate. It is a panel of many crucial decisions that should not be taken lightly and require much thought.

Carve-out is one of the scenarios you may encounter , especially if your business is made up of several assets or bodies. It is a procedure that responds to the establishment of a legal and operational methodology, requiring the intervention of experts in the field.

Very complex to manage, you have to know the workings of it to avoid the risk of encountering constraints that can affect the operation of your business.

Here are some key points that you need to know about a carve-out operation .

Definition of carve-out

Carve-out is an Anglo-Saxon term which means “cutting out” or “separation” . It is a crucial procedure in the world of entrepreneurship that defines the splitting of a parent company with one or more of its assets. It is a process that allows a company to legally administer its separation with one of its bodies.

It is a reorganization with high economic stakes because it allows the parent company to inject cash into more promising activities within its company. The procedure consists of selling company shares, a subsidiary, goodwill, equipment or land to the public. Each asset responds to a different carve-out procedure.

To understand its meaning, it is necessary to determine its purpose (assets or securities) and its use. Carve-out is also defined as a means of generating new independent actions with rights specific to them ( stand alone ). If before, the assets were entangled in the overall structure of the group, the activities sold are better valued.

A carve-out also allows companies to part with assets that they do not need in order to be able to invest in others that are more suited to their development strategy. There are 5 types of split:

  • Sale of goodwill
  • Transfer of securities or share deal
  • Transfer of assets or asset deal
  • Carve-out for the benefit of the partners which consists of allocating assets to them
  • The contribution-transfer combining the transfer of assets and securities

A carve-out is a transfer operation that is beneficial for a company when it is well prepared. It allows the company to be listed on the stock exchange and to appeal to investors who will contribute to the development of its activities without disruption.

The key success factors of a carve-out

For a Carve-out to be a success , it is essential that the company ensures 3 key factors:

  • Anticipation of key questions: which consists in identifying the problems that the company could encounter when taking the decision to dispose of its assets or distribute dividends to its partners. It is essential to analyze the situation well beforehand so as not to risk hampering the smooth running of the activities in progress.

It will then be necessary to see the possible sources of difficulties at the legal, tax and social levels. At the legal level, it will be essential to check all contracts with employees, customers or suppliers, in order to identify the constraints that could affect the separation procedure of the company or group of companies.

All restrictions will have to be studied with precision to facilitate the transition, such as obtaining a co-contracting agreement or the acquisition of pre-emptive rights on the sale of real estate assets. It will also be necessary to check the operating licenses and intellectual property rights that govern trademarks and patents. The business plan will also be revised for the application of a new stand alone reference system.

At the tax level, it is essential to prepare for all the tax procedures of such a change, such as the retention commitment.

At the social level, it will be necessary to plan negotiations so as not to suffer the social stakes of a change of employer, which often leads to transfers and departures.

  • The calendar planning: which consists in organizing the operation in such a way as to respect all the legal notices and all the deadlines imposed by the initiation of a legal procedure. Often a source of conflict, this is an essential phase for prioritizing the tasks to be accomplished and the people to contact. It is here that the application of the Hamon Law is important.
  • Communicate: which consists of informing the people concerned of the progress of the carve-out in order to prepare them for all the transformations that this decision will cause to their work. This is a key factor in the success of a Carve-out . It helps to raise awareness and promote cohesion between employees who will have to face a new situation. It leads to avoiding confusion and opposition.

Good practices to have with the intervention of an interim manager

Face à autant de prérequis, une entreprise peut vite se sentir dépassée. Le management de transition se présente comme une solution adaptée à la situation. C’est un moyen d’intervention d’urgence qui permet de faire face à des nouveaux dispositifs au sein d’une entreprise ou d’un groupe. Il vise à améliorer leurs performances et leur productivité, dans un temps défini.

Reactive Executive represents this type of firm. It is a sure ally for the development of your activities, for the restructuring of your company or for a “Carve-out”. In 48 hours, it offers you experts in the fields you are looking for. But without your collaboration, their interventions have no place. To successfully complete your process, here are the best practices to have with the intervention of an interim manager:

  • Present the interim manager as a solution to the many changes that will occur within the company. Be specific about his role and the time he will spend carrying out his mission.
  • Promote the relationship of trust between the interim manager and the employees. You must work together to complete the operation. It will be necessary to facilitate his integration into the company and create a good working relationship. Stay tuned, promote sharing and encourage communication. Transparency avoids confusion.
  • Remain objective and accept the opinions of someone outside your company. His decisions may not suit you, but you should have an open mind and try not to question his credibility. A priori, its proposals aim to improve your business.
  • Organize and prepare the intervention according to the project situation.
  • Monitor KPIs to ensure the smooth running of the intervention. The manager must commit to setting up indicators which will make it possible to evaluate the results of his intervention.

It should be noted that the outcome of an interim management does not stop at the end of the manager’s intervention. Your participation is essential for the continuity of its mission. He prepares the ground for the successor who will have to be able to ensure the performance of the company, with all the data that the interim manager will have communicated to him.

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