The most sophisticated sellers realise carve-outs can be a fantastic financial arbitrage play. The sum of the parts is often worth more than the whole, and every dollar of CarveCo EBITDA improvement can be worth 10 – 20x in deal value (the multiple), while the cost to implement is often less than 1x.
However, few sellers run their best race; they don’t fully maximise value by articulating a full potential CarveCo. Two lessons stand out:
1. The race is won or lost, long before the starter’s bell: Value creation needs to be brought forward - before the decision to divest – ideally embedded in ongoing portfolio analysis. The earlier you move the value levers, the more of them price into the deal
2. Carve-outs aren’t a normal sprint. specialised race tactics and handoffs need to be learned: Carve-outs are not “Business As Usual” (BAU) and require a specific execution muscle to be built in advance. Choosing to spin, sell or list is a strategic call that demands its own tool-set. A superpower is to flex this muscle while simultaneously executing BAU.
Most carve-out articles will tell you where teams stumble, or what the accounting carve-out guidance says. In this series we seek to buck that trend and focus on ‘the how’: the decisions, capabilities and sequencing that turn a carve-out into a premium performing deal.
