Carve-out complexities can introduce execution risk, lengthen timelines and increase costs but, when managed effectively, they also create opportunities to optimise the business being divested.

A carve-out's structure can take different forms that include:

• A trade and asset sale. In this case, target perimeter assets are transferred directly to the acquirer.
• The sale of an existing legal entity or entities holding the target perimeter assets. Pre-sale reorganisation will likely be required, including the ‘hive-up’ of assets and, potentially, people that the seller will retain.
• The sale of a new legal entity or entities holding the target perimeter assets. Here, a pre-sale reorganisation will be required to ‘hive-down’ target assets to a newly established legal entity or entities.

A central theme in the guideline is the importance of early planning. Investing time up front to identify and mitigate the key risks and issues, and preparing robust plans to address likely bidder concerns, will help to protect and maximise deal value.

The guideline explores the transaction lifecycle and responsibilities across four phases:

1. Validation: strategically priming the business for sale;
2. Preparation: preparing to market the target;
3. Pre-signing: due diligence and negotiations, and
4. Signing to close: completion and separation. 

Carve-outs usually require a range of advisers to support sellers and bidders with preparation and execution. The level of support required is likely to be driven by the size and complexity of the transaction.

This guideline authored by faculty member firms, Grant Thornton UK and Eversheds Sutherland, has been developed to support advisers, boards and management teams in navigating carve-outs.

Further reading:

• Carving out beauty
• Where carve-outs can go wrong