In a high-interest rate economic environment where shareholder value and debt ratios are top priorities, company management is constantly encouraged to evaluate their business strategies. For instance, multinational corporations tend to create synergies by consolidating their internal business through cash pooling arrangements, simplifying headquarter functions, establishing shared service hubs, and/or leveraging group credit facilities. In this context, we also observe companies divesting non-core assets that no longer contribute to their overall corporate strategy. In a low-interest rate environment, we witnessed an increasing appetite from private equity firms for acquiring these carved-out non-core assets. Now, with higher interest rates, strategic investors are returning to the scene even more frequently.
The revenue from a successful divestment can be invested in the further development of the remaining core assets, allowing management to concentrate more on the company’s core business. Carving out integrated business units or “orphan” businesses can be quite complex, especially in a cross-border setting when assets are being acquired, and entities will need to be set up and managed in various jurisdictions. Engaging the right mix of external legal and tax advisors as well as a global corporate service provider can make the difference between a successful transaction and a failed one (or even a transaction that never happens at all).
Each member of the deal team contributes a vital element to the completion of the transaction. A corporate service provider can, for instance, assist with the incorporation of entities, provision of registered office address, appointment of local resident director(s), and the opening of local bank accounts. These administrative services are often required for newly formed entities immediately upon the signing of the asset purchase agreement, where the contemplated timing could be problematic in case the buyer (such as a private equity firm) of the assets does not (yet) have any presence in those countries. A corporate services provider can offer solutions to cover the absence of the buyer’s own resources in the period between (and often beyond) signing and closing.
Important elements to consider when contemplating a carve-out transaction:
- Capabilities and experience
It is important that your corporate service provider has enough experience with , and that they offer the right level of capabilities and expertise. It would be good to check if they can provide any notable references. An experienced corporate service provider can be a valuable source of transaction management tools and other best practices. Furthermore, they can highlight potential challenges and provide relevant insights that may otherwise be overlooked. Consider, for instance, a seemingly simple exercise of incorporating entities in multiple jurisdictions and opening local bank accounts, which has proven to be increasingly difficult and can lead to unexpected delays.
- Global reach
Ensure that your corporate service provider has offices and administrative people in those countries where you require services. In case the corporate service provider doesn’t cover every country where you require services, you could inquire whether their network of preferred partners covers those missing countries. An experienced global corporate service provider has established a professional procedure for selecting and managing their network of preferred partners. They conduct due diligence on their partners to ensure premium quality, make efforts to streamline client acceptance, align terms and conditions, and implement an efficient governance model.
- Central coordination
Ask your corporate service provider if they offer central coordination of your transaction through a single point of contact based in your own time zone. Such a single point of contact can help you and your advisors manage the heavy communication and information flows coming from the various local offices involved in the global carve-out transaction. Central coordination also speeds up the transaction processes by bridging time zones and avoiding communication-related delays, such as language and cultural differences. In larger global carve-out transactions, it may even be preferred to have a central point of contact per continent who can coordinate internally and streamline the processes per region.
What can Apex Group do for you?
We have vast experience in assisting with the implementation of complex cross-border carve-out projects through a dedicated team of subject matter experts in North America, Europe, Asia Pacific, and LATAM. Our team has a significant track record in project management and central coordination of the various local teams involved. Unique to our capabilities is that we not only provide traditional corporate services, which various parties can assist with, but we are also able to open bank accounts through our own banking capabilities in a highly efficient manner. We closely collaborate with your corporate lawyers and tax advisors to ensure a timely and accurate setup of the carve-out structure. Our approach has proven to be a true added value to any global transaction, and our tailored support in global carve-out transactions is a key part of our global Corporate Solutions growth strategy.
