One of the alternatives to challenge macroeconomic conditions, finance restrictions anduncertainties and focus on strategic businesses, carve-outs can be a good routeto growth. A good number of businesses are divesting themselves of non-coreassets especially those with high debt or requiring high level of investment,as part of their preparation for coming economic cycle.
Carve-outtransactions may also offer unique opportunity to realize assets unleashingcapital gains and cash realization and stop continuous re/financing costs.
If a deal opportunity involves strategic acquirers who may agree to accept to pay all orpart of the consideration in shares of their own stock, avoiding taking on hugedebt, making transaction easier and offer sellers synergic and value creationopportunities.
Per sectors the landscape in Europe offers some interesting opportunities:
Energy: Europe’s Green Deal and energytransition to more climate-friendlysolutions is driving most of M&A deals these days. Announced transactionslinke those of US Group Carrier Global purchasing the German Viessmann ClimateSolutions, in the HVAC segment; Automotive industry also in this trend accountsfor a number of transactions like Marelli – Shanghai Electric / Highly. JERA, the Japanese company acquired Parkwind a large offshore wind platform ofBelgium, allowing JERA to accelerate its renewables and offshore windactivities consistent with decarbonization goals.
TMT: Europe’s fragmented telecommunicationslandscape is in consolidation process, one of the major drivers of M&Amarket activity. Divestments are common: key mobile operators need torestructure to compete with global players.
This resulted in one of the largestcarve-out deals of the year: merger of Vodafone and CK Hutchison Group’s UKbusinesses, Vodafone UK and Three UK to create one of Europe’s leading 5G networks -in process subject to regulatory approvals.
Transportand logistics: The French transport andlogistics industry is also undergoing a shakeup, with Transport and logisticssector strategies are adapting following post-covid challenges to newchallenges. Thus, the French Bolloré Group’s has sold its logistics business toshipping giant CMA CGM, and is also shedding its logistics footprint, in ports,logistic operations and other facilities in different locations as it focuses on its media business.
From a legal standpoint a carve-out transaction is the segregation or sale of assets,usually a business unit (asset deal, share deal, etc.) as a partialdivestiture, consisting of one or more non-core business units to third partiesto focus in developing core strategy or raise funds to finance new investments,projects or repay debt.
- Legal and tax implications in the deal structuring.
- Need of a steering committee, a specialmanagement team to lead the process esp. when multiple jurisdictions areinvolved.
- Need to define the deal structure at toplevel and its implementation in different jurisdictions with the differenttreatment and tax, legal and accounting implications in each case – share deal,asset deal, etc.
- Loss of key business partners, keyemployees.
- Emerging contingent liabilities andfindings out of due diligence process.
- Business disruption due to the lengthy,complex deal process involving practically all management team and slow downthe pace of ordinary business activity.
The respective or joint steering committeeneed to retain external sound professionals with the required specializedknowledge and expertise in M&A, in these operations and cross-bordertransactions throughout the process.
Our Amber LBA team can help succeed, fromevaluation of pre-transaction financial and business current model, estimatesto maximize divestment value, design the process, objectives, and timeline,with realistic and efficient segregation plans minimizing impact on businessoperations, estimates of transition costs, preliminary agreements and termsheets, due diligence, analysis, decision-making processes and preparation,negotiation and signing of legal documents, as well as the post-closingintegration helping the transition office ensure smooth transition and continuity of operations.
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© amber legal & business advisors This document is for general information use and should not be considered legal advice. For specific information andadvice you can contact us at info@amberbas.com and www.amberbas.com
