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Clara

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3

Upcoming Big 4 M&A Carve-out/PMI interview

Dear Community,

I would like to ask in question in regard to an upcoming interview I will have at a Big 4 company. I will interview for a position within the PMI/Carve-out team. I know that most of the projects are from a vendors perspective (e.g. vendor due diligence, separation of a business unit, etc.). I am struggling with developing a structure for a possible carve-out scenario on the vendor and buyer side. I also checked previous Q&A's and could extract some valuable information, however these information mostly apply to the buy-side. My question here would be if anyone has an idea or could suggest a possible way to structure a carve out separation case (e.g. Car Company XY is planning to sell their motorcycle division. How should they proceed?).

I would start with asking the following clarifying questions:

  1. Why is the company selling the business unit?
  2. Do they have a financial target in mind (value of business unit)?
  3. What is the internal time frame the business unit should be sold?

As I stated before I am struggling with the development of a structure, however, if I think about the problem, I would like to tackle the following points:

  1. Company analysis How would the company be affected if they sell the business unit? To what extent is the business unit interlinked with the company/group?
  2. Operational Due Diligence Which business units would be affected by the separation?
  3. Separation strategy How feasible? Is it doable?
  4. Risks (Strategic, organizational, financial)
  5. Recommendation

Thinking about a potential integration strategy, I would go as follow:

  1. Company analysis How would the company be affected if they buy the business unit?
  2. Operational Due Diligence Which business units would be affected by the integration?
  3. Integration strategy How feasible? Is it doable? IT, Employees, ...
  4. Risks (Strategic, organizational, financial)
  5. Recommendation

I am very happy for any kind of feedback and help!

Dear Community,

I would like to ask in question in regard to an upcoming interview I will have at a Big 4 company. I will interview for a position within the PMI/Carve-out team. I know that most of the projects are from a vendors perspective (e.g. vendor due diligence, separation of a business unit, etc.). I am struggling with developing a structure for a possible carve-out scenario on the vendor and buyer side. I also checked previous Q&A's and could extract some valuable information, however these information mostly apply to the buy-side. My question here would be if anyone has an idea or could suggest a possible way to structure a carve out separation case (e.g. Car Company XY is planning to sell their motorcycle division. How should they proceed?).

I would start with asking the following clarifying questions:

  1. Why is the company selling the business unit?
  2. Do they have a financial target in mind (value of business unit)?
  3. What is the internal time frame the business unit should be sold?

As I stated before I am struggling with the development of a structure, however, if I think about the problem, I would like to tackle the following points:

  1. Company analysis How would the company be affected if they sell the business unit? To what extent is the business unit interlinked with the company/group?
  2. Operational Due Diligence Which business units would be affected by the separation?
  3. Separation strategy How feasible? Is it doable?
  4. Risks (Strategic, organizational, financial)
  5. Recommendation

Thinking about a potential integration strategy, I would go as follow:

  1. Company analysis How would the company be affected if they buy the business unit?
  2. Operational Due Diligence Which business units would be affected by the integration?
  3. Integration strategy How feasible? Is it doable? IT, Employees, ...
  4. Risks (Strategic, organizational, financial)
  5. Recommendation

I am very happy for any kind of feedback and help!

3 answers

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Best Answer
Book a coaching with Clara

100% Recommendation Rate

62 Meetings

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USD 229 / Coaching

Hello!

Feel free to PM me! Back in McK I did plenty of DDs, all were M&A, so happy to chat

Cheers,

Clara

Hello!

Feel free to PM me! Back in McK I did plenty of DDs, all were M&A, so happy to chat

Cheers,

Clara

Book a coaching with Adi

100% Recommendation Rate

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USD 169 / Coaching

Hey,

Good timing, I just finished helping two candidates get ready for their upcoming M&A interviews at BIG4 :).

From a sell-side perspective, the M&A lifecycle is as follows:

  1. Pre-Deal: Whats the Strategy- focus on core business, remove underperforming business, free up capital?!
  2. Deal Execution
    • Carve out strategy- carve-out then divest, carve-out and divest in parallel or divest then carve-out
    • Carve out planning- scope, timeline, costing, contracting etc
  3. Divestment & Carve-out execution - legal aspects, cutover, transfer, testing, change management etc
  4. Separation & readiness

So, overall you are going in the right direction. Have a look at this thread too: https://www.preplounge.com/en/consulting-forum/private-equity-value-creation-interview-what-to-expect-and-how-to-structure-answers-8871

Am here if you need any more help, so feel free to shoot a direct message.

All the best.

Hey,

Good timing, I just finished helping two candidates get ready for their upcoming M&A interviews at BIG4 :).

From a sell-side perspective, the M&A lifecycle is as follows:

  1. Pre-Deal: Whats the Strategy- focus on core business, remove underperforming business, free up capital?!
  2. Deal Execution
    • Carve out strategy- carve-out then divest, carve-out and divest in parallel or divest then carve-out
    • Carve out planning- scope, timeline, costing, contracting etc
  3. Divestment & Carve-out execution - legal aspects, cutover, transfer, testing, change management etc
  4. Separation & readiness

So, overall you are going in the right direction. Have a look at this thread too: https://www.preplounge.com/en/consulting-forum/private-equity-value-creation-interview-what-to-expect-and-how-to-structure-answers-8871

Am here if you need any more help, so feel free to shoot a direct message.

All the best.

Hello Adi, thank you very much for your insights. I got a better understanding of the challenges/opportunities of Carve-outs now! — Anonymous A on Jun 03, 2021

Book a coaching with Ian

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328 Meetings

29,156 Q&A Upvotes

USD 289 / Coaching

Hi there,

You're asking some great questions! That said, it's hard to adequately answer such an extensive/exhaustive list!

Let me provide you with 1) Prior Q&As and 2) Some initial thinking on Carve-outs.

==========================================

CARVEOUTS

In essence, your framework needs to look to solve the question: Will the 2 parts be larger than the whole? That is, will seperating these 2 assets generate more value than they're worth together? If yes, how do we do so effectively?

So, you need to look at:

Current Costs/Benefits of Incorporated Unit

What does it bring to the joined entity in terms of higher revenues and reduced costs

What does it take away from the entity in terms of cannibalisation, inefficiencies, overhead, etc.

Value of Seperated Unit

On its own, what is this worth?

How Carve-Out

Analyze all "entertwined" aspects of the companies. IT, Organizational structure, physical assets, etc. Is it possible to split the two? What will the cost be? Is the cost of the carve-out less than the overall added value from the carveout?

=============================================

RELATED Q&AS

https://www.preplounge.com/en/consulting-forum/private-equity-value-creation-interview-what-to-expect-and-how-to-structure-answers-8871

https://www.preplounge.com/en/consulting-forum/investment-cases-ma-pe-hf-differences-9236

https://www.preplounge.com/en/consulting-forum/what-is-a-good-framework-to-use-for-looking-at-a-carve-out-during-a-case-interview-8771

https://www.preplounge.com/en/consulting-forum/hi-i-would-like-to-know-about-the-case-framework-which-we-can-use-for-technology-ma-deal-adviosry-7640

https://www.preplounge.com/en/consulting-forum/pwc-tech-deals-case-interview-9223

Hi there,

You're asking some great questions! That said, it's hard to adequately answer such an extensive/exhaustive list!

Let me provide you with 1) Prior Q&As and 2) Some initial thinking on Carve-outs.

==========================================

CARVEOUTS

In essence, your framework needs to look to solve the question: Will the 2 parts be larger than the whole? That is, will seperating these 2 assets generate more value than they're worth together? If yes, how do we do so effectively?

So, you need to look at:

Current Costs/Benefits of Incorporated Unit

What does it bring to the joined entity in terms of higher revenues and reduced costs

What does it take away from the entity in terms of cannibalisation, inefficiencies, overhead, etc.

Value of Seperated Unit

On its own, what is this worth?

How Carve-Out

Analyze all "entertwined" aspects of the companies. IT, Organizational structure, physical assets, etc. Is it possible to split the two? What will the cost be? Is the cost of the carve-out less than the overall added value from the carveout?

=============================================

RELATED Q&AS

https://www.preplounge.com/en/consulting-forum/private-equity-value-creation-interview-what-to-expect-and-how-to-structure-answers-8871

https://www.preplounge.com/en/consulting-forum/investment-cases-ma-pe-hf-differences-9236

https://www.preplounge.com/en/consulting-forum/what-is-a-good-framework-to-use-for-looking-at-a-carve-out-during-a-case-interview-8771

https://www.preplounge.com/en/consulting-forum/hi-i-would-like-to-know-about-the-case-framework-which-we-can-use-for-technology-ma-deal-adviosry-7640

https://www.preplounge.com/en/consulting-forum/pwc-tech-deals-case-interview-9223

Thank you soooooooo much Ian. This is very valuable and really helps to further develop a structure. It also takes away "some" complexity! Thanks again!! — Anonymous A on Jun 01, 2021

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