Carve Out

Companies have always been exposed to external and internal influences that have caused reactions and changes within the company itself. Companies have always had to reinvent themselves. The reactions have been diverse. They ranged, for instance, from the hunt for economies of scale in the form of cross-sector industrial groups to concentration on core competencies. Currently, companies are facing a variety of transformations, in some cases entire industries.

Drivers include digitalization, disruptive business ideas and ecological significance, among others. These industry developments are leading to business units or product areas being put to the test and an active portfolio policy being pursued. The key aspect is that companies are striving for greater agility in terms of their organizational structure. They want to put themselves in a position to sell activities that are no longer relevant to them and in turn acquire or develop areas that are promising for the future.
 

Drivers of Transformation

• Financial Services
• Retail
• Pharmaceutical Industry
• Utilities
• Automotive Industry
• Healthcare
• Entertainment Industry

Carve-outs as a key factor in a company’s transactional capability

As such, transactional capability is a key success factor for today’s companies. Carve-outs are of great significance in this regard.

Following strategic considerations, preparatory measures often involve organisationally separating the business segments under discussion within a group, thereby preparing them for a potential sale or reorganisation. These preparatory measures should be carried out as part of a dedicated carve-out process to ensure a positive outcome.

The tasks associated with a carve-out are interdisciplinary and present the people involved with extraordinary challenges. This is due not only to the wide range of issues but also to the fact that such projects usually have to be managed alongside day-to-day work, often leading to resource bottlenecks within the company. Furthermore, in the case of a stand-alone concept, the corporate functions must be established for the carve-out unit, meaning that there is a duplication of functions in this area.

Challenges of carve-out processes

Carve-out processes are often extremely complex. The following factors contribute to this complexity:

• Business units that are not self-sufficient
• A large number of countries and companies/operating sites involved
• An unclear definition of the carve-out entity
• A heterogeneous IT environment
• Limited availability of financial data
• Close group interdependencies/shared activities
• Complex HR structure

As part of a carve-out, existing organisations, workflows and systems must be reviewed for their validity and ability to provide optimal support, both within the transferring business unit and in the spun-off division. We support the decoupling process as part of the reorganisation, both in terms of strategy and assessing viability across the individual functional areas, as well as in all necessary steps from planning and designing the measures through to the roll-out of the changes within the set timeframe.

Carve Out Financials

Carve-out financial statements are initially historical financial information, similar to individual and consolidated financial statements. This indicates that carve-out financial statements reflect transactions or business transactions that actually took place at a certain point in time in a certain period of time in the past. Except in the case of a carve-out relating to only one company, carve-outs generally belong to the group of "combined" financial statements. Combined financial statements in the narrower sense are financial statements in which only legally independent companies are combined. In practice, however, it is often the case that a sub-unit is combined with one or more sub-units and/or one or more legal entities (combined financial statements in the broader sense). This means that a highly integrated business unit can neither be presented in a subgroup nor in separate financial statements and needs to be transferred to a separate subgroup. Such integrated business units typically extend beyond company law boundaries, whether with bundled holding functions or with mixed-use production or sales locations.

Carve-outs often take place in an international context and should therefore be prepared in accordance with IFRS. However, there are no specific regulations for combined financial statements in IFRS, which creates corresponding leeway in the preparation. The same applies in accordance with HGB.

As part of the carve-out process, we support you conceptually and with the implementation and preparation of carve-out financial statements. We also assist you with the preparation of balance sheets in accordance with § 17 UmwG. We ensure that the carve-out financial statements contribute successfully to the carve-out in coordination with you and the overall process.