Felix Frohn-Bernau, Chief Executive Officer of Palero Capital; Heather Morawski, Director and Senior Legal Counsel – Mergers & Acquisitions, Corporate Governance, Robert Bosch; Brendan O’Connor, Assistant General Counsel – Mergers & Acquisitions, Assistant Secretary of Honeywell International; Mario Sabljo, Principal, Paragon Partners; and Eberhard von Strenge, Member of the Executive Board of Nord Holding, together with panel head Friederich von Hurter, Partner Delivering Deal Value of PwC discussed Carve-Out and Cross-Border M&A.
To begin with, the panellists agreed that during a carve-out process, the crucial aspect is time. The longer the carve-out process takes, the more aspects are revealed to the buyer and the less leverage the seller maintains. The peculiarity of carve-out transactions lies in the fact that a lot of aspects—in opposition to stand-alone companies—remain unknown, considerably reducing the due diligence process. Therefore, the task of the buyer is to obtain as much information as possible within the short time and with the limited sources left.
The panel agreed that in order to reach a reliable valuation, the buyer must identify the key drivers of the company through the due diligence process. It often cannot be avoided that certain aspects end up being overestimated, while others are underestimated. In the end, balance is the solution.
The panellists agreed that a transitional service agreement (TSA) is a crucial part of a successful carve-out process. The complexity of this TSA has to be accepted in order to assure that the seller provides all services the buyer is not able to provide.
Throughout the entire process, communication between the seller and buyer side is of utmost importance. In order to perfect this communication, the teams working on the carve-out must be chosen carefully and be able to work well together. This led the panel to discuss communication strategies, ranging from one big team to a group of small teams.
Friedrich von Hurter,