IT Carve-out
Carve Out: Business Strategy in Full Expansion
You are embarking on a " Carve-Out " ?
The dates are set and there's only one thing left to do: make sure everything is ready on the big day! Extraordinary penalties are at stake.
Processes, tools and people must be ready.
The "Carve OutDivestment, or the sale of divisions and subsidiaries, is a corporate strategy that is attracting increasing attention in the business world. This involves splitting off a specific part of a company to make it an independent entity.
This may be a division that no longer corresponds to the parent company's overall strategy, a business unit or a subsidiary.
The main objective of the "Carve Out is to enable the demerged entity to operate autonomously, to concentrate its resources on its core activities, to realise its own growth potential and even to become a company in its own right.
This process brings with it significant challenges and benefits for businesses, which are driving its growing adoption.
Thanks to its expertise and experience as a " Carve-Out " , JALIX has become a recognised player, particularly when, in parallel with the " Carve-Out "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 is a financial and commercial term that refers to the sale or demerger of a specific part of a business, usually a division or subsidiary, to transform it into a separate and independent entity.
This operation separates this part from the parent company and gives it an autonomous existence.
The "Carve-Out are often carried out for a variety of reasons, including simplifying the organisational structure, concentrating on the parent company's core business, seeking specific financing for the division being sold, or selling the division to a third party.
As part of this operation, the assets, liabilities and employees associated with the 'carvée' division are transferred to the new entity.
This can be a complex transaction, often involving contractual negotiations, asset valuations, legal and regulatory issues, and financial adjustments.
Companies generally call on experts such as JALIX in order to successfully complete the "Carve-Out effectively and in compliance with the laws and regulations in force.
The challenges and benefits of Carve Out
The challenges of Carve Out :
- Complexity : The operations of "Carve Out are often complex, requiring the separation of one entity from a larger business. This can involve challenges relating to assets, liabilities, employees and contracts.
- Legal risks : They may give rise to legal risks, particularly if contracts, licences or supplier agreements are transferred to the new entity.
- Initial costs : The costs associated with a "Carve Out are often substantial. They include legal, accounting and consultancy fees, as well as restructuring and communication costs.
Advantages of Carve Out :
- Focus on Core Business: By spinning off a non-essential division, the company can concentrate on its core business and on higher-growth activities.
- Strategic flexibility : The "Carve Out enables the company to adapt more easily to market changes and growth opportunities. It can reallocate its resources more effectively.
- Value creation : While the "square" division has intrinsic value, the creation of a "square" division is not. "Carve Out can create shareholder value by transforming it into an independent entity capable of attracting specific investors.
- Specific funding : The new entity resulting from the "Carve Out may seek specific financing or investors interested in its activities, which can be difficult when the division is part of a larger business.
- Improving Agility : By eliminating processes, contracts and cost structures linked to the "carved out" division, the company can become more agile and responsive.
- Reducing Complexity : The "Carve Out simplify the company's organisational structure, which can lead to operational and administrative benefits.
- Possibility of Sale : A 'carved out' division may be more attractive to a potential buyer, opening up the possibility of a sale to a third party.
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 Carve-Out IT 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)