How to Prepare for a Carve-Out: Tips & Key Challenges 

Partners making deal, shaking their hands, sitting in work place, wearing elegant, classic suits, to sign a contract, three professional, confident, stylish, attractive partners find a compromise

The first 100 days of any business transition are critical – and where a carve-out is concerned, this process becomes even more complex, costly and time-consuming. 

As specialists in helping businesses navigating the intricacies of this process, we’ve outlined some essential tips for conducting a successful carve-out so you’re best prepared to maximize the value of a deal. 

What is a Carve-out in business? 

A carve-out is the process of selling an asset, interest or investment to outside investors in exchange for a cash infusion that permits a business to continue to rework their operations without the total loss of operational oversight. 

The asset being sold is not the business itself but rather a particular area that may become more profitable underneath different management or with outside support. 

How to Prepare for a Successful Carve-out 

  1. Find a Transitional Service Agreement support team 
  2. Make sure your team is ready for the shift 
  3. Engage with a financial consulting firm to properly prepare financial statements 
  4. Identify the right IT experts for systems integration & implementation 

1. Find a Transitional Service Agreement support team 

A transitional service agreement (TSA) is an arrangement between a buyer and a seller that outlines information about the services being provided during a business transition or transaction, including accounting, IT, human resources and more. 

During a carve-out, some business processes need to be created anew whereas others need to be consolidated to save time, cut down on overhead spend and foster alignment. As such, the goal of a transition service agreement during a carve-out is to provide a roadmap for the successful collaboration – and eventually, separation – of two entities.   

Understanding where synergies may lie while ensuring a smooth transition of services can be quite complex, as you’ll need to have crystal-clear documentation regarding finance and accounting functions, technology configurations, operational procedures and many other areas of business. 

It’s vital that you find the right TSA support team to help you identify the best path forward, make processes more efficient and drive collaboration, as this process can become incredibly expensive and time consuming when you fail to allocate the right resources.

2. Make sure your team is ready for the shift 

After you’ve outlined the transition of services, you’ll want to make sure everyone is informed, as this agreement often brings changes to the way your team functions. 

One of the main challenges of conducting a successful carve-out is limiting costly interruptions to business operations. In order to minimize disruption, it’s vital to identify whether or not you need to create a new team or move some of your own people around – and then, of course, inform them as soon as possible so they can properly prepare for the shift. 

For best results, you may want to turn to a team of change management experts to provide expert guidance for reorganization or hire interim or fractional roles to fill the gaps while you transition.

3. Engage with a financial consulting firm to properly prepare financial statements 

Another key challenge of a carve-out is preparing the financial statements and the chart of accounts for the eventual consolidation or separation into a fresh balance sheet.  

Financial statement preparation needs to be effective and accurate while factoring in any regulatory requirements. As a company transitions from a public to private entity, accounting and tax implications will change – and understanding which you’ll have to face is a complicated endeavor. 

However, by turning to a financial consulting firm (along with a tax and legal specialist), you’ll be best prepared to navigate current policies, reduce the potential for risk and ensure you’re following laws and regulations. 

4. Identify the right IT experts for systems integration & implementation 

Oftentimes, the carve-out process will require the integration or implementation of a system or software in order to ensure synchronicity with your buyer or seller.  

Understanding which solutions and systems will be most beneficial for enhancing operational performance, gathering high quality insights and streamlining communication is a challenging endeavor – and combining pre-existing systems with others is even more so.  

For best results, leave it up to the experts. The right IT experts will take the time to understand your business processes, needs and goals before offering suggestions, develop roadmaps for integrations and implementations, eliminate cybersecurity threats, and show you how to optimize your systems and solutions so you can drive growth both now and in the future.

Final Thoughts on How to Successfully Conduct a Carve-out 

Even if you have great accountants or IT experts on your team already, it’s best to find external partners in order to help you streamline the process and identify the most valuable path forward. 

Simply put, a carve-out is a lot of work. Conducting a successful one requires the seamless integration of separate entities, including their people, processes and systems — and without turning to a trusted partner to help you grow, time and money will be wasted while your people scramble to figure out what to do. 

Bridgepoint Consulting has a team of carve-out experts ready to assist you by providing: 

  • Interim or fractional CFO support to manage tactical execution 
  • FP&A and other project specialists to forecast and deliver technical analysis for management and auditors 
  • Cloud evaluation and systems implementation and integration experts  
  • Cybersecurity planning teams 
  • NetSuite implementation and integration 

You can view some of our previous carve-out work with clients here: Vault Pressure Control & Pelican Energy Partners

Need Carve-out Support?

From reporting compliance to evaluating current systems, Bridgepoint Consulting‘s experienced transaction advisory team has the specialized expertise to help companies prepare a careful strategy, provide rigorous due diligence and ensure efficient execution of the carve out.

Contact us today or learn more about our carve-out support services at the link below.