Shaped by the current corona crisis, some companies are considering completely separating from an existing business unit. The number of realized European carve-outs, as well as the deal volume related to carve-outs, has significantly decreased since 2015. In 2015, there were over 3,000 such deals; by 2019, this number had fallen to just 1,476 transactions, according to Pitchbook. Current developments in Europe are expected to initiate a reversal, particularly once the M&A environment has stabilized again.

It is important to be well prepared when spinning off the business unit. What transaction value can be achieved for the unit if there are no separate financial figures? This is just one of the many questions that should be clarified before the sale.

The re-focus on the core business often sets the carve-out considerations in motion. Especially if the business unit is lagging behind economic expectations and an internal restructuring is not desired or the company to be sold needs new capital.

How should the business unit now be prepared so that it attracts interest from an external investor? Here, the numerous interdependencies must be carved out and, if necessary, supplementary services (IT structures, etc.) must be added.

The increased complexity also has an impact on the M&A process, as accurate figures first have to be worked out as part of the sale, as they are often not available. This takes time and monetary resources. It is particularly important to ensure that the business unit remains interesting for a third party and does not lose its attractiveness due to excessive complexity. It is important to address the interests of potential investors at an early stage in order to achieve the best possible fit. This in turn has an impact on the determination of a transaction value for the business unit.

A more intensive due diligence becomes mandatory and will extend the process once again. Therefore, when evaluating the business unit, the company to be sold should also put itself in the perspective of the potential investor. The operative performance is of decisive importance here – without considering the environment of the parent company (synergy potentials + cost structures).

Do you have any questions or need support on the topics of M&A / restructuring & reorganization? We can be reached at 02150 7058 210, by email at office@starkpartners.de or on the web at www.starkpartners.de.

Carve-out