Carve Out

The role of an Interim Manager for a Carve-Out

A Carve-Out is a delicate operation that requires detailed financial and legal knowledge. A transition manager is therefore perfectly suited to take charge of the Carve-Out of your structure.

What is a Carve-Out?

Carve-Out is a structural simplification measure that consists of parting with a business unit and transferring it to a new entity .

When the Carve-Out is carried out by the parent company, the latter separates from a branch, a subsidiary or an activity to give it the legal status of a subsidiary or separate company and create a company ex nihilo in order to exploit it. It is therefore an operation that concerns the legal and financial structure of a company.

In the event of Carve-Out by a subsidiary, the subsidiary acquires a branch, subsidiary or activity of its parent company without changing its legal status and continues to be legally dependent on its parent company. However, it becomes a separate entity like a subsidiary that has evolved.

In all cases, the Carve-Out is an approach that is accompanied by an operation of transmission of know-how and means , of part of the capital and/or voting rights.

Carve-Out Types

• Sale of goodwill

The Carve-Out consists of the transfer of a company’s goodwill to a new entity, which may be a subsidiary.

• Transfer of exploitation rights

The Carve-Out takes place when the transfer of the operating rights of a business or activity is made by a company to a new entity. This transfer can be carried out either by a company or by a fund specializing in carve-out.

• Equity investment

The purpose of the Carve-Out is to acquire a stake in a company, by grouping the activities of several companies into a new entity.

• Take over

The purpose of the Carve-Out is the takeover of a company by a new entity.

The stakes of a Carve-Out

Carve-Out can be used to accelerate the value of company assets for resale , while preserving company assets in a fast-growing market.

• Economic and financial stakes of a Carve-Out

The Carve-Out can bring financial advantages to the ceding company, for example:

1. Greater remuneration on the asset sold, through the implementation of a negotiated price that may include a premium on the sale.
2. Coverage of risks related to the business sold by the new owner.
3. A deferral of taxation in order to reduce the tax burden generated by the transfer.
4. The decrease in operating costs related to the management of the divested business.

• Legal issues of a Carve-Out

The creation of a new entity (“subsidiary”) is often a necessary step in the exercise of shareholder rights, in particular with regard to a capital increase, appointment of a director, etc. It is therefore important to be specific about the power to represent the ceding company and the new entity.

Carve-Out projects are easier to implement if the shareholder rights are fully owned by the selling company. Other scenarios may be more complex (partial ownership, minority shareholders, etc.) and require specific legal assessment and follow-up.

The stakeholders involved in the Carve-Out must be consulted beforehand in order to gather their opinions on the terms of the Carve-Out and their roles in the process of transferring the activity.

• Social issues of a Carve-Out

Staff affected by a Carve-Out operation may be worried about the future of their jobs and their working conditions, which is why it is necessary to have an open and transparent dialogue with them.

To do this, the stakeholders concerned (the transferee and the transferring company) must communicate with the personnel and draw up appropriate social plans with them.

In this context, a person from outside the company such as an Interim Manager can best support this complex period.

Why call on an Interim Manager to manage your Carve-Out?

Interim Managers have a legal and managerial background. They support companies in their projects to optimize their structure and optimize their activities.

However, they are able to adapt to any type of problem, whether it is a Carve-Out, a redeployment project, an outsourcing project, etc.

Interim management represents an effective solution for a company wishing to better manage its Carve-Out .

• A transition manager to support a job protection plan

In the event of Carve-Out, it is common to set up a job backup plan. This mechanism makes it possible to ensure the sustainability of the jobs of a company or structure in the event of economic difficulties. For this, it is possible to call on a Transition Manager who can use his status as an external help to the structure.

This accompanies employees and company managers through the various stages of a social plan, in a non-discriminatory manner.

• A transition manager to support a redeployment project

Transition Managers can support companies in their redeployment projects. This is a process that consists of defining a new strategy, rethinking the means to implement it and defining a new work environment.

In this context, an Interim Manager has his place to support this complex project, he can put his expertise, his professionalism and his experience at the service of the company.

To carry out a Carve-Out, a complex operation with serious consequences, an external professional delegated over a defined period within the company can provide you with effective support.