How far did Searchers explore Carve-out opportunities

searcher profile

April 15, 2025

by a searcher from HEC School of Management, Paris in Paris, France

I am curious to see how far searchers around the world have explored the carve-out or spinoff options.
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commentor profile
Reply by an intermediary
from The University of Chicago in Chicago, IL, USA
Not sure what you mean by "How far", but here are few observations. 1) Financials are a challenge: a) You have to rely on metrics like gross profit or contribution margin. b) Working Capital analysis may require a lot of work if there are common customers, parts, etc. 2) Most buyers bring their own capital. Difficult to finance for a first-time buyer. 3) Imo, carve-out is different than spin-out. In spin-out the business unit is relatively isolated, at least, the operation side of it. Those are easier. 4) In one situation, I sensed that the business already had written off the asset. So, I structured the offer in a way that created "Income" to the selling CEO's operation. He came out like a hero. 5) In another situation, the carve-out business was highly entangled with the main business. Seller could not share key data. So, we had to hire a 3rd party accounting firm with fiduciary responsibility to DD w/o disclosing sensitive info to the buyer. 6) Carve outs can be good if you know the business, customer retention plan is in place and price is close to the asset value (may be liquidation value) minus the cost of relocation.
commentor profile
Reply by a searcher
from London Business School in State of São Paulo, Brazil
Hardest part for us was figuring out if the carve-out/spin-off has a management team at all. Generally they have a lot of common services with the original company, mostly for back-office and is hard to identify if it can stay as a stand-alone company with some key executives/employees with you taking over a CEO role.
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