In Law360 Expert Analysis, White & Case M&A partners Kimberly Petillo-Décossard and Kristen Rohr examine key considerations for dealmakers looking to execute divestitures, carve-outs and spin-outs amid growing optimism for both an economic soft landing and an end to the Federal Reserve's rate-hiking.
Despite their complex processes, the authors argue that "no matter where the economic and policy winds may shift, divestitures, carve-outs and spin-outs can deliver on the promise of value creation."
The authors flag that business leaders continue to turn to these types of transactions, noting that "29 percent, nearly one-third, of CEOs are planning an asset sale in 2024, per a January survey of 1,200 global CEOs conducted by EY. The same survey revealed 70 percent of the 300 global private equity leaders polled believe that corporates will accelerate divestment activity this year."
In order to succeed, Petillo-Décossard and Rohr suggest that company leaders examine nine key elements before executing one of these transactions, including the deal's perimeter, overall structure and process; contracts; intellectual property matters; employees and management matters; regulatory and compliance approvals; property matters; transitional services; data protection; and financial accounting and indebtedness.
The authors liken the process of executing divestitures, carve-outs and spin-outs to untangling a plate of spaghetti. They say, "With so many spaghetti-like issues to untangle, the best dealmakers will begin the process early, identify relevant concerns at the outset, and then carefully manage those risks through closing day. After all, nobody wants the power suit they set aside for the closing dinner to be splattered with marinara sauce."
See the full Law360 article here.
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