Barry Duncan

The number and value of completed corporate carve-outs increased in 2020 and is widely anticipated to grow further over the course of next year. The number of divestitures of this type typically increase during times of economic decline as companies attend to liquidity requirements, consider what to do with underperforming assets, or divest businesses that are no longer core to overall strategy.

Carve-outs represent one of the most complicated of transactions both for parent companies and new standalone entities, as well as any prospective new investors. The road map to successfully separating all the functions that were once shared by parent and new independent entity can be long and fraught. Panamoure has helped a number of carve-out businesses in recent years and that experience tells us that separating IT capabilities in such circumstances, and getting the carved-out business ready with respect to IT services and personnel, can be one of the most complicated aspects of the process. There can be no denying its complexity, but having an extra pair of hands alongside, that have successfully performed such operations previously, will help avoid the many pitfalls and the potential for incurring unnecessary costs.

The opportunity for creating value is there for all parties: the divesting parent company, the departing carve-out and potential new investors. It just has to be well executed.

The IT due diligence for carve-out opportunities is all too frequently conceived and delivered merely as a standardised risk assessment exercise, when the real opportunity for the target entity and parent alike, is to reassess how their IT functions operate, which applications need to be replaced or decommissioned, where contracts can be renegotiated and consider the advantages of digital and Cloud-first solutions to improve the IT operating efficiency of both parties. Carve-outs present, a still relatively rare, opportunity to transform two businesses. The framework described above is the approach Panamoure teams prefer to adopt when helping carve-out targets, sellers or prospective new investors; by simplifying these understandably complex transactions. If you are considering the possibility of such a scenario, or are about to embark on a carve-out, please get in touch to discuss your IT separation and enhancement strategy and learn how Panamoure can ease that journey.

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