Carve-out IT

Outsourcing, a strategic lever

You are embarking on a project to IT carve-out ? The dates are set and there is only one thing left to do: to have everything ready on D-day! Unusual penalties are at stake. Processes, tools and people must be ready. And what about sourcing?

It is essential for a company to regain its autonomy after a sale or LBO, particularly in terms of its information system, which is often highly pooled within a group.

Carve-out refers to this critical stage of IS separation. The project is both technical (migration of infrastructures, applications, legal (transfer of assets, contracts, licences, etc.) and organisational (processes, team, etc.).

The additional constraints are that the separation dates are fixed and there is only one requirement: that everything is ready on the day! Unusual penalties are at stake.

Thanks to its expertise and experience in Carve-Out ITJALIX has become a recognised player, particularly when, in parallel with the Carve-Out IT the ambitious new company must build its new IS (often almost from scratch) and be agile by opting for Cloud solutions.

What is Carve-out?

A carve-out consists of financially, legally and operationally separating an entity from its parent company, in the context of an asset split. Less studied than its counterpart, mergers and acquisitions, it is a behind-the-scenes process which nevertheless mobilises the management teams of the parent company, the entity being sold, the buyer, bankers, consultants and other technical experts who support them in the same challenge: the sale of the entity being sold under good conditions and at a pre-agreed price.

The issues

The lack of control of the IT carve-out may affect the operational and financial success of the operation, or even call into question the operation as defined in the original agreement. The usual timeframes for stabilising systems must be shortened to keep up with the financial operation's schedule. Prior to the demerger, poor project management generates additional costs and may jeopardise the planned disposal date, undermining investor confidence. After the spin-off, any degradation of IT services has destructive consequences, at a time when the divested company needs to demonstrate its autonomy and prove itself in its market.

An IT project aligned with the four main stages of carve-out

  • The pre-signing phase, during which the seller and buyer will negotiate the terms of the contract,
  • The pre-closing phase following the signing of the contract, during which the project team is put in place and begins to plan the overall project and carry out the activities leading up to closing, including the carve-out,
  • At closing the sold entity is transferred to the buyer and the transition phase begins, during which the teams on both sides will carry out the operational separation,
  • Once the transition is complete, the cut-off phase ends all links between the parent company and the divested entity, which must now be able to operate the final activities independently. The post-cut-off cleanup phase is completed.

Structuring the IT carve-out project

  • Define first the operating principles for the project teams, which will serve as a reference point when the pressure mounts. Give priority to responsiveness, direct exchanges and complete transparency in internal communications and with the three stakeholders. Implement enhanced collaboration through social tools and ensure that trust is maintained.
  • Assess the IT readiness for carve-out at the start. A detailed analysis of the IT environment and the degree of integration is the basis for the separation scenario.
  • Then define the target level of IT autonomy for the entity on the day of the sale. Ideally, the subsidiary should be sold with a completely autonomous IT. But in most cases, it will continue to use IT services provided by its former parent company. These will need to be identified as soon as possible in order to define specific agreements called Transaction Service Agreements (TSAs)