Corporate carve-outs are one of the most challenging transactions to execute. Acquiring a business unit that's part of a larger organization usually requires massive planning and transitional service agreements. Yet, with all of its complexities, Sam French, M&A integrations and Separation Specialist, managed to pull off three carve-outs simultaneously. This article will discuss her experience and best practices.
"Always add contingency into the plan. As you do discovery, something always comes up. But if you have contingencies, you can be flexible and avoid delays." - Sam French.
Fairly recently, Sam was involved in carving out three separate business units simultaneously from one organization. To complicate things, all three had different products, cultures, compensations, and locations. Moreover, there were no indications that the business units came from one owner.
One of the biggest challenges is understanding all three companies - what's included in the sale, what's missing, and how they will all fit together. In addition, it is crucial to understand the type of integration - will it be immediate, or will the business be left as a standalone?
When approaching deals like this, the first thing to do is define the deal perimeter - What is the business for sale, how many employees do they have, and what are the things not included in the sale process?
The second step is understanding the target company's operating and business model.
These will help identify the existing gaps to achieve the investment thesis. For example, if the acquirer buys the target company and leaves it alone, the business will need its own operating model. But if they are integrating the businesses, they need to consolidate the operating models and identify how they will work.
Integration planning is about filling those gaps and getting ready to execute as soon as the deal closes. Therefore, the integration team needs to start as early as possible and work in parallel with the diligence team.
The key to managing such a complex transaction is constant communication with the entire team. Sam likes to have weekly meetings with workstream leads and have them talk through the types of information they need. That way, each workstream lead will understand what other workstreams are looking for to promote collaboration and information sharing. It is also when Sam shares critical decisions made, so everyone is up to speed.
In addition, she also does one-on-one session meetings with the workstream leads to build that relationship and guide them to whatever they might need.